Bst Case Studies All Chapters Watermark Pagenumber Compressed 1

Business Studies Case Studies
Chapter 1 Nature & Significance of Management
Question :1
Sanjana is a branch manager of of ABC handicrafts pvt. Ltd. The company objective is
to promote the sale of Indian handloom and handicraft products. Its sells fabraics,
furnishings, readymades and households’ items are made out of traditional Indian
fabrics. Sanjana decides quantities, variety, colour and texture of all the above items
and then allocates resources for their purchase from different suppliers . She
appoints a team designers and crafts people in the company, who develops some
prints for bed covers in bright colours on silk. Althrough they looked very impressive,
they were more expensive than they had planned to sell. Average customer could not
afford to buy it. Prasing their effort, Sanjans suggested that they should keepbthe silk
bed covers for special occassions like Diwali and Christmas and offer the cotton bed
covers on regular basis to keep costs under control.
Identify the functions of management which Sanjana performs by quoting the lines
from the above para.
Answer
 Planning:'Sanjana decides quantities variety, colour and texture of all above items ...'
 Organising: allocates resources for their purchase from different suppliers '.
 Staffing: She appoints a team of designers and crafts people in the company ...'
 Directing: Praising their efforts, Sanjana suggested that they should keep the silk bed
covers for special occasions like diwali and christmas ....'
 Controlling:' offer the cotton bed covers on a regular basis to keep costs under
control.'
Question :2
Ashutosh Goenka was working in ‘Axe Ltd.’, a company manufacturing air purifier. He
found that the profits have started declining from the last six months. Profit has an
implication for the survival of the firm, so he analysed the business environment to
find out the reasons for this decline.
a) Identify the level of management at which Ashutosh Goenka was working.
b) State three other functions being performed by Ashutosh Goenka.
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Answer:
a) Ashutosh Goenka was working at top level of management.
b) The three functions being performed by him at this level are outlined below:
 He is responsible for formulating the overall organizational goals and
strategies.
 He is responsible for all the business activities and its impact on society.
 He has to coordinate the activities of different departments in pursuit of
common goals.
Question :3
Rishitosh Mukerjee has recently joined AMV Ltd, a company manufacturing
refrigerator. He found that his department was under-staffed and other departments
were not cooperating with his deparment for smooth functioning of the organisation.
Therefore, he ensured that his department has the required number of employees
and its cooperation with other deparments is improved.
a) Idenfity the level at which Rishitosh Mukerjee was working.
b) Also, state three more functions required to be performed by Rishitosh
Mukerjee at this level.
Answer:
a)Rishitosh Mukerjee is working at middle level of the management.
b)The three more functions that he has to perform at this level are stated below:
 He has to assign duties and responsibilities to the people in his department.
 He has to motivate the people in his department to achieve the desired
objectives.
 He has to interpret the policies framed by top management.
Question :4
Sridhar’s father is working as a section in-charge in a government office. Identify the
level of management at which he is working? State any five functions that he has to
perform at this level.
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Answer:
Sridhar’s father is working as a section in-charge in a government office. He is
working at the lower level of management.
 He has to perform the following functions at this level of management:
 He has to directly oversee the efforts of the workforce.
 He has to serve as a link between the workers and middle level managers.
 He has to ensure sufficient availability of resources and good quality of output.
 He has to provide guidance and training to workers.
 He has to ensure that good working conditions are provided to the workers.
Question :5
Josh Enterprises decides to have a meeting of all the key employees of different
departments in the organisation. The main motive is to tell the employees to keep
the target of 20% increase in sales as the main objective when they work throughout
the year. The meeting is full of ideas regarding the employees and processes
involved. Various plans are made to harness the potential of the employees and
streamline the processes. However, with the passage of a few days the external
business environment checks the capability of the organisation to adapt to the
situations. The company successfully comes out at the end of the year with flying
colours. What are the various characteristics of management you can find highlighted
here? Also identify the lines in which these characteristics have been highlighted.
Answer:
The various characteristics of management involved here are:
 Goal Oriented. The main motive is to tell the employees to keep the target of 20%
increase in sales as the main objective when they work throughout the year.
 Multidimensional. Various plans are made to harness the potential of the employees
and streamline the processes. Employees—People and Streamline the process—
Operations.
 Dynamic. However, with the passage of a few days the external business
environment checks the capability of the organisation to adapt to the situations.
Question :6
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Tec Ltd.is a company producing It Services. The company's profits are enough for the
survival and growth. The management of the company believes that a satisfied
employee creates a satisfied customer, who in turn creates profits that leads to
satisfied shareholders. So, it pays competitive salaries and perks to all its employees.
All the employees are happy working in the organisation because of personal growth
and development. The company has a strong sense of social responsibility. It has set
up an engineering college in which one - third of the students are girls to whom the
company gives 50% schokarship. Is the management of H. Tech Ltd. Fulfilling its
objectives? Justify your answer by giving reasons.
Answer:
Yes, the management of H. Tech Ltd. is fulfilling all the objectives _organisational
objectives.
Organisation objectives are the economic objectives of a business. These are survival,
profit and growth. Profits of H. Tech are enough for the survival and growth.'
 Social objectives involve creation of beneifts or economics value of the society.
H. Tech Ltd. has set upnan engineering college in which one -third of the
students are girls to whom the company gives 50% scholarship.'
 Personal objectives are related to the employees. The management of H. Tech
Ltd. Satisfied the financial needs of its employees by giving them competitive
salaries and perk. It also satisfies their higher-level needs such as personal
growth and development.'
Question :7
XYZ Ltd. is a management-oriented company. Time and again all the employees learn
from their seniors’ various ways of dealing with diverse situations. They are provided
training whenever required. They are also given incentives both financial as well as
non-financial. The result is employees see their development in the organisation. The
organisation tries to behave as a responsible constituent of society and ahvays
creates good quality products. It has a very good image in the market. The training
modules are superb, and the employees always try to find unique ways of providing
solutions in the context of rapidly changing business environment. This has helped
the organisation to adjust frequently in a very good manner.Which importance of
management is highlighted here? Also identify the lines.
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Answer:
The importance of management highlighted here are:
 Development of personnel. They are also given incentives both financial as well
as non-financial. The result is employees see their development in the
organisation.
 Development of society. The organisation tries to behave as a responsible
constituent of society and always creates good quality products.
 Helps in becoming dynamic organisation. The training modules are superb, and
the employees always try to find unique ways of providing solutions in the
context of rapidly changing business environment.
Question: 8
Gold Land Pvt. Ltd. is a wheat producing company. Daily 5000 bags of wheat weighing
10 kg each are produced here. In comparison to the previous year this ere has been a
smaller number of bags produced on a per day basis. The number is around 4500
which is less than the target of 5000 set by the company. The company however has
been able to reduce the costs involved in comparison to last year’s spending on the
production and packaging of each bag. The quality of bags has also been up to the
mark. Identify the concept of management ignored here.
Answer:
 The concept ignored here is that of effectiveness as the quantity produced

here is lesser than targeted. Effectiveness requires output to be in required
quantity, time and quality.
Question 9:
A floor manager of a mall is a very good manager as he utilizes all the functions of
management to minimize cost of maintenance of his area. He directs all the staff
members under him to follow the targets and advises them to put their efforts in the
direction of achievement of these targets. Under his guidance the employees admit
that they learn a lot and are able to meet their targets. This has led to the increase in
their salaries. Identify the importance of management highlighted above.
Answer:
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 The importance of management highlighted here are:
 Management increases efficiency. A floor manager of a mall is a very good
manager as he utilizes all the functions of management to minimize cost of
maintenance of his area,
 Management helps in achieving group goals. He directs all the staff members
under him to follow the targets and advises them to put their efforts in the
direction of achievement of these targets.
 Management helps in achieving personal objectives. This has led to the
increase in their salaries.
Question: 10
ABCD Inc. is a company which deals with providing car service at home and on road.
There are different departments in this company like Human Resources, Marketing,
Finance, Research & Development and Operations. The top management of the
company tries its level best to synchronize the activities of different departments in
the best possible manner. The result is the increased efficiency and attainment of
goals. However with the passing of time the size of the company has grown and now
there are many branches of this company. The synchronization has turned more
important with the increase in the size of the company and the number of
employees. The Departmental Heads of the company are specialists in their
respective areas and the top management tries to work with them not with authority
but by respecting their views on the subject. Their ego clashes are avoided to ensure
smooth functioning of the organization.
a) Identify the concept of management highlighted above.
b) Write two benefits highlighted in the above paragraph of this concept.
Answer:
 The concept of management highlighted above is that of Coordination. The top

management of company tries its level best to synchronize the activities of
different departments in the best possible manner.
 The importance of coordination:
o Growth in size. When the organisation grows in size coordination plays an
important role in synchronizing all the activities as the number of employees
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and branches increases. The synchronization has turned more important with
the increase in the size of the company and the number of employees.
o Specialisation. The specialists like the departmental heads cannot be tackled
just by unity of command. They have their own egos. Here the best way to
tackle them is to ensure coordination among them. Their ego clashes are
avoided to ensure smooth functioning of the organisation.
Question: 11
Saagar Ltd. believes in coordination among departments and activities. The company
relies heavily on professional coordination. For this the company takes steps
throughout the year. Coordination is kept in mind by all the managers regardless of
the level they are working at. Throughout the year the various activities are
synchronized without failure. Every department ensures that within it every
employee and operation is guided by the theme of proper coordination. Whenever
an employee takes an action, he consults others, whenever needed, thus properly
contributing to his team. The process of coordination is just not limited to the
employees. Even at the departmental level the various departments use this binding
force to create perfect harmony among them so that the organisational goals can be
fulfilled. All the coordination that occurs in the organisation is a result of proper
training and premeditated attempts by the company to get the best results possible.
The above case represents all the characteristics of coordination. Identify the lines
which represent them and also name the characteristics.
Answer:
 Coordination is the responsibility of all managers. Coordination is kept in mind

by all the managers regardless of the level they are working at.
 Coordination is a continuous process. Throughout the year the various
activities are synchronized without failure.
 Coordination is all pervasive. Every department ensures that within it every
employee and operation is guided by the theme of proper coordination.
 Coordination is a group activity. Whenever an employee takes an action he
consults, others whenever needed, thus giving properly contributing to his
team.
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 Coordination involves unity of action. Even at the departmental level the
various departments use this binding force to create perfect harmony among
them so that the organizational goals can be fulfilled.
 Coordination is a deliberate function. All the coordination that occurs in the
organization is a result of proper training and premeditated attempts by the
company to get the best results possible.
Question 12:
Alpha Beta Inc. decided to go for perfect coordination in the various aspects of the
company. They focus on synchronization of all the activities of the organisation. For
this they know coordination will be the key. At the stage of thinking of what is to be
done throughout the year they decide to take into consideration the harmony
between the goals of the organisation and those of the individual departments.
When they hire employees, they pay them only after evaluating their worth in terms
of how efficient they are. Finally when the last month of production comes they, time
and again check the deviation between the set targets and the actual production
done.In the above paragraph the main focus is on coordination. However various
functions of management also come into picture.
You have to identify the three functions of management highlighted above in which
coordination can be seen.
Answer:
The various functions of management highlighted above are:
 Planning. At the stage of thinking of what is to be done throughout the
year they decide to take into consideration the harmony between the goals of
the organisation and those of the individual departments.
 Staffing. When they hire employees, they pay them only after evaluating their
worth in terms of how efficient they are.
 Controlling. Finally, when the last month of production came, they were time
and again checking the deviation between the set targets and the actual
production done.
Question: 13
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Dheeraj, Neeraj and Suraj are three friends. They work in the same company. They
are managers but they belong to three different levels of management. Every day
they meet and discuss their work with each other. One day they were having a
conversation.
Dheeraj said, “These days I am having a lot of problems motivating the people at
Shop Floor. I have decided to purchase two new machines. I know I will have to set an
example by being the best leader.”
Neeraj said, “I am having problem with knowing the exact requirement of people in
my department. Different polices have to be informed to the employees so that they
become aware of our company’s goals. I also have to coordinate with other
departmental heads to know their requirements.”
Suraj said, “I have to decide for long term. I know I will be ultimately responsible for
every activity. All the policies and strategies require a lot of planning before
formulation.”
In the above case identify the different levels of management these three friends
belong to.
Answer:
 Dheeraj belongs to lower level of management. Lower-level manager works at

the Shop Floor level. Shop Floor is the place where workers work, and
machines are kept.
 Neeraj belongs to middle level management. Middle level manager decides the
number of employees to be required in his department. He also has to
coordinate with other departmental heads though at the same level.
 Suraj belongs to the Top level of management. Top level manager is required
to plan for long term basis. He is responsible for all the activities in the
organisation. Policies and strategies are formulated by the Top management.
Question:14
In a country named Wonderland acting is considered as a profession. Whosoever has
to become an actor has to read books written about acting. These books tell the
nuances of acting and without reading these books one can’t be considered as an
actor. To judge the ability of an actor an examination is conducted and then a degree
is assigned to the qualified persons who can then act in films. There is also a body
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which provides membership to all actors. There are about thirty thousand actors in
wonderland who are compulsorily members of this organisation.
What are the three features of profession highlighted here? Also identify the lines
highlighting these features.
Answer:
The three features of profession highlighted here are:
 Well-defined body of knowledge. An actor has to read books written about
acting.
 Restricted Entry. To judge the ability of an actor an examination is conducted
and then a degree is assigned to the qualified person who can act in films.
 Professional Association. Actors in wonderland who are compulsorily members
of this organisation.
Question: 15
Faulty works Inc. has a very dynamic Plant Superintendent, Amit, who is fond of
dealing with tough situations. He is a perfectionist who believes in doing quality
management. Every week he prepares a schedule which helps in minimization of
wastage of efforts and time of the department. He however is upset with the
cutthroat competition among the employees which is having a negative impact on
the overall production. Even after all such problems he is managing the situation very
well. On 26th Feb he informs his boss that the target given to him has been achieved
and with the best quality.
The best part was that still two days were remaining for the deadline to be over
which was 28th Feb. However, his boss was not pleased as the cost incurred by his
team for the completion of project is more than the allowed limit.
a) In the above case find out the concepts of management violated and the
concepts flollowed?
b) Also tell at which level of management does Amit work?
Answer:
 The concepts of management which have been violated are:

o Cooperation. There is so much competition among the employees that there is
negative outcome of it.
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o Efficiency. There has been more than expected spending of resources which
has led to increase in overall costs incurred.
 The concepts of management which have been followed are:
o Coordination. Every week he prepares schedule and thus brings down wastage
of efforts.
o Effectiveness. As the work is completed before time and with required quality.
 Amit works at the middle level management as Plant Superintendent is a
middle level manager.
Question 16:
Pricey Medicines was a world level medicine manufacturing company. However
recently its fame had come down under the impact of resignations put forth by two
of its departmental heads. These departmental heads were experts in their fields.
One was leading the.marketing department and the other was a scientist of repute
who headed the manufacturing department. In the top level management meeting it
was found that such departmental heads who were specialists in their areas can’t be
tackled by unity of command. They were egoistic as they were specialists.
After the meeting things started to change for the organisation as all the
departments started to work with one single target of giving the company its lost
fame. There was a combined effort which doubled the revenue of the organisation. A
special regulation system of including every level manager was brought into action.
Thus the overall functioning of the organisation was improved.
a) In this case a concept of management was missing. Identify it.
b) Also identify its characteristics highlighted here.
Answer:
 After meeting the things started to change for the organization as all the
departments started to work with one single target of giving the company its lost
fame. There was a combined effort which doubled the revenue of the organization. A
special regulation system of including every level manager was brought into action.
Thus, the overall functioning of the organization was improved.
The concept of management which was missing was Coordination (such
departmental heads who are specialists in their areas can’t be tackled by unity of
command).
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 The two characteristics of coordination which are highlighted are:
o Unity of Action—as all the departments started to work with one single target
of giving the company its lost fame: and
o Responsibility of all managers—A special regulation system of including every
level manager was brought into action.
Question: 17
Ice Air Manufacturers are the leading AC manufacturers. On meeting the record
target they decided to give prize to the best worker of the year. Rajesh who is a very
devoted worker wins the prize of the best worker. He is very happy. Mr. Kulkarni who
is the CEO of the company gives a heart-touching speech. He tells all the workers
present that the company should reach new heights this year. Their contribution will
be immense. He tells them that the revenue this year should exceed cost so much so
as to reduce the business risk. So that in the coming years company could show
increase in the number of workers, number of products produced and also the sales
turnover. The speech ends with the promise made by the labour union head that the
company will get the full support from the workers.
a) In the above case which type of objectives are discussed by Mr. Kulkarni in the
speech?
b) What is the other term used for this category of objectives?
c) At which level of management does Rajesh work in the company?
Answer:
 The type of objectives discussed are Organizational Objectives since

o Profit—revenue this year should exceed cost so much so as to reduce the
business risk; and
o Growth—increase in the number of workers, number of products produced
and also the sales turnover is discussed here.
 The level at which Rajesh works is the non-managerial level since all the workers
work at this level and he is a worker (Rajesh who is a very devoted worker).
Question: 18
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Shiva Computers Ltd. is a leading company in Computer Technology and IT services.
The CEO of the company attributes the success of the Company to its managerial
team spirit, which have helped to handle rapid changes in technologies and to
transform threats into opportunities. Like any other business enterprise profits are
important for survival and growth of Shiva Computers Ltd. The management of the
company believes that a satisfied employee creates a satisfied customer; who in turn
creates profits that lead to satisfied shareholders.
The company has a strong sense of social responsibility. It has set up many
educational institutions in the field of management, engineering and computer
education, in which half of the students are girls.
On the basis of the given information about Shiva Computers Ltd. answer the
following
a. Identify and explain the objectives of the company discussed in the
above para. Also quote the lines for the identified objectives.
b. Identify any two values which the company is trying to communicate to
the society.
Answer:
a) “Like any other business enterprise profits are important for survival and growth of
Shiva Computers Ltd.”
o Objective—Organisational objectives. Organisational objectives include proper
utilisation of material and human resources to fulfill the economic objectives of
the business. These economic objectives include the following:
o Survival. Management has to ensure the survival of the organisation. An
organisation must generate sufficient revenue so that it is able to cover its
costs.
o Profit. Management must ensure that business earns profit so that it can
continue its operations in the long rim.
o Growth. It involves adding to the prospects of the business in the long run.
Growth of the business is indicated by increase in sales volume, increase in
number of employees, increase in investment, etc.
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o “The management of the company believes that a satisfied employee creates a
satisfied customer, who in turn creates profits that lead to satisfied
shareholders.”
o Objective—Personal objectives. Various people join a particular organisation to
satisfy their diverse needs that range from financial needs to affiliation needs.
Management aims at reconciling personal goals with organisational goals for
the purpose of creating harmony. “The company has a strong sense of social
responsibility. It has set up many educational institutions in the field of
management, engineering and computer education, in which half of the
students are girls.
o Objective—Social objectives. Social objectives involve creation of benefit by
the business for the society. It involves creation of economic value for the
benefit of the members of the society.
b) Values:
 Team Spirit and Good work culture.
 Women’s Empowerment.
 Fulfilling social responsibility by showing concern for the society.
Question 19:
White Camel Sports Ltd. has recently given job to two employees. Rajesh work
experience as Rajesh is a bit older and had worked in an MNC earlier. However, both
are paid equally. Every person in their department knows that Rajesh is more
efficient than Suresh. Definitely they see a mismatch in the salaries and the
efficiencies of the employees in the company. The marketing department of the same
company has this year set a monthly target of 10000 units of sports items to be sold.
In the month of March 6000 items were sold and the deviation was 4000 units. In the
month of April 8000 units were sold and the deviation was 2000 units. Despite these
deviations no effort is being made to track the performance of the company to
minimize the gaps.
In the above case which two functions of management have been discussed? A very
important concept of management has also been overlooked. Identify it.
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Answer:
The functions of management discussed above are—
 Staffing (The company has recently given jobs to two employees).
 Controlling: The concept of management which is missing in the above
case is coordination. There is lack of coordination in staffing (they see a
mismatch in the salaries and the efficiencies of the employees in the
company) and controlling (no effort is being made to track the
performance of the company to minimize the gaps).
Question :20
Cyclone cycle is a leading bicycle manufacturing company. The company decides to
manufacture 5000 bicycles by the end of the month. The bicycle manufacturing cost
is to be kept below Rs.750 per unit. The bicycles have to be manufactured at the set
toughness enduring capacity at the scale of 8 out of 10. With all these parameters in
mind the company kick starts its manufacturing. By the 28th of the month the
company is able to achieve the manufacturing of 5050 bicycles. The toughness
endurance scale is well above 8.25 out of 10. When everything seems to have gone
well the manufacturing department reveals that per unit cost of each bicycle is
Rs.780.
In the above case do you think that the company has been able to achieve
Effectiveness?
Answer:
 Yes the company has achieved Effectiveness. Since the quality (toughness scale—
8.25 well above 8), quantity (5050 units well above 5000 units) and deadline (the
target is achieved on 28th) have been achieved. The company lacks in efficiency
as per unit cost has gone above the set target by Rs.30.
Question :21
Mr.Sanjeev is responsible for the welfare and survival of his organisation. After few
years of gaining work experience, he decides to write a book on management.
In his book he broadly gives five valuable suggestions:
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 Management of a company is good if it is able to calm down the resistance of
the employees. Whenever the employees find something new they tend to
resist. It is in the favour of the company and the employees must be guided to
accept the change and thus bring down the resistance. They must learn only
change is constant.
 Unless and until the betterment of employees is achieved management is
useless. A good management helps its employees by giving them recognition,
increment in salary, promotion, etc.
 Management should earn profits, but it should also produce good products. It
should also involve itself in providing facilities to society without any profit
motive. Further it should help to provide employment in backward areas by
focusing on these areas also.
 Management should apply all the functions of management like planning,
organizing, staffing, directing and controlling. The essence of management
which is coordination should be present in every function of management.
 Management should provide common direction to its employees. They will
always diversely interest and their efforts will go off the track, but it is
important to guide them in the required direction.
At which level of management does Sanjeev work? What will be the outcomes of
these five suggestions?
Answer:
 Sanjeev works at the top level to management of the company as he is

responsible for the welfare and survival of his organisation.
 Now the consequences of his suggestions will be:
o Management helps in making a Dynamic Organisation. If it is able to calm down
the resistance of the employees.
o Management helps in achieving Personal Objectives of the employees. *A good
management helps its employees by giving them recognition, increment in
salary, promotion, etc.
o Management helps in Development of Society. Produce good products, involve
itself in providing facilities to society without any profit motive and provide
employment in backward areas by focusing on these areas also.
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o Management helps in improving efficiency. Efficiency is achieved when
management applies all the functions of management like planning, organizing,
staffing, directing and controlling.
o Management helps in achieving group goals. Provide common direction to its
employees. Their efforts may be diverse and unrelated, but they should be
provided a common direction.
Question :22
In an island there is a famous ship company. Hundreds of workers work here. All of
them belong to a culture where they help each other. The environment in the
company is about helping each other thus leading to a great environment in the
company. However the company lacks professionalism. Most of the workers are
school dropouts and they hardly know how to make their work synchronized as a
team. Failing of plans is common in this company.
After reading the above case find out the concept of management which is followed
and its advantage. Also find out one concept of management which is violated and its
outcome on the company.
Answer:
 The concept of management which is followed is Cooperation. Since the workers

help each other and the general environment in the company is of cooperation.
The advantage of cooperation is that there is satisfaction within the employees in
its presence.
 The concept of management which is violated is Coordination. They hardly know
how to make their work synchronized as a team. One disadvantage of not
following coordination is the wastage of effort and time
Question:23
A very innovative firm has decided to increase its sales. The company is good, but
they have noticed that their growth has stagnated for the last couple of years. The
top management calls for an emergency meeting. For this they have outlined a series
of activities to be performed by each person. The people are told the activities they
have to perform. Thus, the work is divided among individuals. The efforts taken by
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the firm turn out to be very productive for the organisation and it gains huge profit.
The newspapers and management institutes also praise the company for its high
standards of management. However, as time passes the size of the organisation
grows and thus, they think of bringing another concept of management with a lot of
precision. This concept of management is not voluntary but rather based on a lot of
clear-cut thinking in advance. The main idea is to reduce confusion among the
employees regarding any of the activities they have been assigned.
Identify the functions of management highlighted in the above lines which the
company follows. Also Identify in the above lines a concept of management discussed
which the company tries to bring. Find out one importance and one characteristic of
this concept highlighted above.
Answer:
 The functions of management highlighted above are

Planning (The company has decided to increase its sales)
Organising (The work is identified and divided among individuals).
 The concept of management highlighted above is Coordination.The importance of
coordination when the size of the organisation increases is told here and the
characteristic highlighted is coordination is deliberate. The concept of management is
not voluntary but based on a lot of clear cut thinking in advance.
Question :24
Management has evolved like other disciplines. There are umpteen numbers of books
of management. One can see that the various theories of management are getting
absorbed in the competitive work environment. We can see students of various
courses like MBA, BBA, etc. acquiring learning of the systematic knowledge in their
syllabus. When these students come in the actual industry environment, not all of
them are successful. Success in actual work environment depends upon the
intelligent application and mastery of the basic principles of management. Today
various companies are considering them as responsible components of society and
have started including Corporate Social Responsibility in their main program. These
companies have realised that they will be requiring support from Government and
people if they want to achieve some important feats in this field.
18
In the above paragraph one feature is each of science, art and profession has been
discussed. Identify each of them.
Answer:
 Management as Science—Systematised body of knowledge. We can see students of

various courses like MBA, BBA, etc. acquiring learning of the systematic knowledge in
their syllabus.
 Management as an Art— Based on practice and creativity. Success in actual work
environment depends upon the intelligent application and mastery of the basic
principles of management.
 Management as a Profession—Service Motive. Companies are considering them as
responsible components of society and have started including Corporate Social
Responsibility in their main program.
Question: 25
Aman, Ahmad and Ally are partners in a firm engaged in the distribution of dairy
products in Maharashtra state. Aman is a holder of Senior Secondary School :ate from
Central Board of Secondary Education with Business Studies as one of his elective
subjects. Ahmad had done his post graduation in History and Ally in dairy farming.
One day there was a serious discussion between Ahmad and Ally regarding the
nature of management. Ahmad argued that management was a profession. Whereas
Ally argued against it saying that the legal and medical profession are the only
professions because they fulfill all the conditions of profession. Aman on the basis of
his knowledge of business studies explained the nature of management as a
profession to Ahmad and Ally.
Explain, how Aman would have satisfied both Ahmad and Ally.
Answer:
 Aman would have satisfied both Ahmad and Ally by explaining the following features
of management as a profession.
 Well-defined body of knowledge. All professions are based on a well-defined body of
knowledge that can be acquired through instruction.
 Management too is based on a systematic body of knowledge comprising well-
defined principles. This feature of profession is present in management.
19
 Restricted entry. The entry to the above stated profession is restricted through a
prescribed qualification. But there is no restriction on anyone being appointed as a
manager in any business enterprise. So, presently this feature of profession is not
present in management.
 Professional association. Legal and medical professions are affiliated to a professional
association like bar council and medical council which regulates entry, grants
certificates of practice and formulates and enforces a code of conduct. There are
several associations of practising managers in India, like the AIMA that has laid down
a code of conduct to regulate the activities of their members. There is, however, no
complusion for managers to be members of such an association. So, presently this
feature of profession is not present in management.
 Ethical code of conduct. Legal and medical professions are bound by a code of
conduct which guides the behaviour of its members. AIMA has devised a code of
conduct for Indian managers but there is no statutory backing for this code. So,
presently this feature of profession is not present in management.
 Service motive. The motive of legal and medical profession is to serve their client’s
interests by rendering dedicated and committed service. The basic purpose of
management to help the organisation achieve its goals by providing good quality
products at reasonable prices, thereby serving the society, is being increasingly
recognised. So, presently this feature of profession is not fully present in
management. This shows that management does not satisfy all the criteria of a
profession. So, Aman would have been able to satisfy both Ahmed and Ally by making
them understand that Management is a profession but not a full fledged or a true
profession.
Question: 26
Dinesh is a versatile manager. However due to the nature of his job most of the time
of his day is occupied with planning. One day his friend who runs an advertising
company calls him for a lunch. Dinesh finds his friend very busy as his friend tells him
that the company, he is working in is very busy these days in finding the right person
for the right job. Soon Dinesh leaves after having a detailed discussion with his friend.
During that lunch he learnt many things from his friend and applied the things learnt
in his company the best outcome was the adaptable nature of the company that
20
turned out to be after application of this learning. The company earned more
revenue by the end of the year.
Which level of management Dinesh belongs to? What function was performed by his
friend’s company? Which particular characteristic of management was achieved by
Dinesh for his company? Also identify the concerned lines.
Answer:
 The level at which Dinesh is working is Top level of management (most of the time of
his day is occupied with planning).
 The function performed by his friend’s company is Staffing. The company he is
working in is very busy these days in finding the right person for the right job.
 The characteristic of management achieved by Dinesh is Dynamic Function. The best
outcome was the adaptable nature of the company that turned out to be after
application of this learning.
Question: 27
Ashutosh Goenka was working in ‘Axe Ltd.’, a company manufacturing air purifiers.
He found that the profits had started declining from the last six months. Profit has an
implication for the survivial of the firm, so he analysed the business environment to
find out the reasons for this decline.
(a) Identify the level of management at which Ashutosh Goenka was working.
(b) State three other functions being performed by Ashutosh Goenka.
Answer:
(a) Top level management.
(b) Following are the three functions performed by Ashutosh being a top level manager.
 Integrating the diverse elements and coordinating the activities of different
departments as per the overall objectives of the organisation.
 Formulating overall organisational goals and strategies for their achievement.
 Taking the responsibility for all the business activities and for its impact on the
society.
Question: 28
21
Rishitosh Mukerjee has recently joined AMV Ltd;> a company manufacturing
refrigerators. He found that his department was under-staffed and other
departments were not cooperating with his department for smooth functioning of
the organisation. Therefore, he ensured that his department has the required
number of employees and its cooperation with other departments is improved.
Identify the level at which Rishitosh Mukerjee was working.
Also, state three more functions required to be performed by Rishitosh Mukerjee at
this level.
Answer:
 Rishitosh Mukerjee is working at the Middle Level management. Nature &

Significance of Management
 Three functions performed at this level are:
o Interpreting the policies faced by the top management.
o Assigning necessary duties and responsibilities to the subordinates.
o Motivating the personnel to achieve desired objectives.
Question: 29
Clean Sanity ware is a big company. Managing many employees at the same moment
is a challenge which this company always faces. Since the company has many
departments it is necessary for the company to ensure unity of action among various
departments. The various departments are human resources, marketing, finance,
operations and sales. The employees are always concerned about the company and
are a useful resource to their organisation. Though they have diverse interests and
have to perform different activities the management ensures that the efforts of the
employees should be given a focus so as to achieve the organisation goals. The
different departments have their own interests but due to proper coordination the
conflicts of interest in the departments is minimized to a nil. When it comes to the
employees the organisation shows its concern. The career of employees is shown a
developmental path through proper training modules and job enrichment. Rajeev is a
manager who takes care of all the duties and responsibilities to be assigned to his
employees in the department. He uses all sources to develop a proper
communication with them and leaves no attempt to motivate them. This year the
22
company has decided to give the best manager award to Rajeev for his contribution
to the organisation.
Which characteristics of coordination have been highlighted in the above case?
Which type of objective is fulfilled here? At which level of management does Rajeev
work? Which function of management does he perform here? Also identify the lines
in each case.
Answer:
 The characteristics of coordination involved above are:

o Coordination ensures unity of action (characteristic of coordination). Since the
company has many departments it is necessary for the company to ensure unity of
action among various departments.
o Coordination integrates group efforts (characteristic of coordination). Though they
have diverse interests and have to perform different activities the management
ensures that the efforts of the employees should be given a focus so as to achieve the
organisation goals.
o Functional Differentiation (Importance of coordination). The different departments
have their own interests but due to proper coordination the conflicts of interest in
the departments is minimized to a nil.
o The objective which is fulfilled here is the Personal Objective. The career of
employees is shown a developmental path through proper training modules and job
enrichment.
o Rajeev works at the middle level of management. Rajeev is a manager who takes care
of all the duties and responsibilities to be assigned to his employees in the
department.
o Rajeev is following the Directing function of management. He uses all sources to
develop a proper communication with them and leaves no attempt to motivate them.
Question: 30
Sooraj works as a salesman in a company selling pet accessories and food. He has
been given a target of selling 1200 units of the food packets in a month by offering a
maximum of 10% discount to his customers. In order to meet his monthly sales
target, on the last two days of the month, he offers 15% discount to his customers.
In the context of the above case:
23
Is Sooraj effective in his work? Explain by giving a suitable reason in support of your
answer.
Answer:
 Yes, Sooraj is effective in his work as he has been able to meet his monthly sales
target of selling 1200 units of the food packets.
Question: 31
Sujata works as a designer in an export house. As per the terms of an order received
by the export house, she has to get 1000 units of denim jackets made in 15 days @ ?
2000 per jacket. She is able to complete her target production in 20 days because in
order to complete the order in 15 days she would have made the workers work over
time. As a result, the cost of production per jacket may have increased by ? 100.
Is Sujata efficient in her work? Explain by giving a suitable reason in support of your
answer.
Answer:
 Yes, Sujata is efficient in her work as she has been able to get 1000 units of denim
jackets made @ ? 2000 per jacket.
Question:32
XYZ Power Ltd. set up a factory for manufacturing solar lanterns in a remote village as
there was no reliable supply of electricity in rural areas. The revenue earned by the
company was sufficient to cover the costs and the risks. As the demand of lanterns
was increasing day- by-day, the company decided to increase production to generate
higher sales. For this/they decided to employ people from a nearby village as very
few job opportunities were available in that area. The company also decided to open
schools and creches for the children of its employees.
Identify and explain the objectives of management discussed above.
State any two values which the company wanted to communicate to the society.
Answer:
 The objectives of management discussed above are:
24
o Organisational objectives: An organisation strives to achieve multiple organizational
objectives in the interest of its stakeholders like owners, employees etc. The main
organisational objectives are survival, profit and growth.
o Social Objectives: It is the obligation of every organisation to undertake such activities
which will benefit the society at large like using eco-friendly methods, contributing
towards weaker sections of the society, generating employment opportunities,
promoting literacy etc.
 The two values that the company wanted to communicate to the society are:
o Rural development
o Promoting literacy
Question:33
Geetika is working in a private sector bank. One of her key function relates to the
formulation of the overall organisational goals and strategies of the bank. Identify the
level of management at which she is working? State any three other functions that
she has to perform at this level.
Answer:
 Geetika is working at the top level of management in the private sector bank. The
three other functions that she has to perform at this level are outlined below:
o She is responsible for the success and failure of the organisation.
o She is responsible for all the business activities and its impact on society.
o She has to coordinate the activities of different departments in pursuit of common
goals.
Question 34:
Arundhati has been promoted to the post of Marketing Division Head of a soft drink
company. Identify the level of management at which she will be working henceforth.
State any four functions that she will have to perform at this level.
Answer:
 Henceforth, Arundhati will be working at middle level of management.

 The four functions that she will have to perform at this level are stated below:
o She has to ensure that her department has the necessary staff.
25
o She has to assign duties and responsibilities to the people in her department.
o She has to motivate the people in her department to achieve the desired objectives.
o She has to co-operate with the other departments for ensuring smooth functioning of
the organization.
Question:35
Ajay and Sanjay are childhood friends. Sanjay had lost his right hand in an accident in
childhood. They meet after a long time in a restaurant. On being asked, Sanjay tells
Ajay that he feels very discontented in managing his family business after the death
of his father as it doesn’t match with his areas of interest. Ajay knows that Sanjay
possess extraordinary skills in management although he hasn’t acquired any
professional degree in management.
Therefore, he asks Sanjay to wind up his business in India and join him in his hotel
business in Dubai as an Assistant Manager in Sales and Marketing Division.
In context of the above case:
Can Sanjay be deployed at the post of Assistant Manager in Sales and Marketing
Division though he hasn’t acquired any professional degree in management? Explain
by giving suitable justifications in support of your answer.
List any two values that are reflected in this act of Ajay.
Answer:
 Yes, Sanjay can be deployed at the post of Assistant Manager in Sales and Marketing
Division although he hasn’t acquired any professional degree in management as
management is not considered to be a full-fledged profession because of the
following reasons:
 Restricted entry: Unlike management, the entry to the other professions is restricted
through an examination or eligibility criteria like specific percentage in a particular
degree or diploma. However, management as a profession does not fulfill this
criterion as anyone can be called a manager regardless of his/her academic
qualifications.
 Professional association: Unlike managers, all working professionals have to be a
member of an affiliated professional association which regulates their entry, grants
certificate of practice and formulates and enforces code of conduct. For example, the
26
practicing lawyers have to be a member of Bar Council of India, the practicing doctors
should have membership of All India Medical Association etc. However, in case of
management, although there exist several management associations like the AIMA
(All India Management Association), neither does it have any statutory backing nor is
it mandatory for the practicing managers to a member of such associations.
 The two values that are reflected in this act of Ajay are:
o Compassion
o Responsibility
Question:36
Ramarjuna joins an IT firm as a system analyst after completing his master’s in
computer science. As the nature of his work demands he has to work in very close
coordination with all the departmental heads in the firm, very soon Ramarjuna
realizes that each departmental head has own individual style of working. They differ
greatly in their day-to-day approach to work. They tend to deal with a given situation,
an issue or a problem through a combination of their own experience, creativity,
imagination, initiative and innovation.
Identify and explain the nature of management highlighted in the above case.
Answer:
 In the above case, management is being considered as an art.

Art is the skillful and personal application of existing knowledge to achieve desired
results.
 The evaluation of management as an art is given below:
 Existence of theoretical knowledge: Art presupposes the existence of certain
knowledge. Management fulfills this criterion as there exist a number of theories and
principles on management which have been formulated by various management
experts.
 Personalised applications: Art is a personalised concept. Management fulfills this
criterion as a good manager works through a combination of his own experience,
creativity, imagination, initiative and innovation to carry out the assigned work.
27
 Based on practice and creativity: All art is practical. Management fulfills this criterion
as a person becomes a better manager with constant practice and experience. This
also leads to emergence of different styles of management.
Question:37
Real Alliance Ltd. is a well-known cement company in India. It is able to earn
adequate revenues to cover costs. Its capital base, number of employees and
production turnover has increased manifolds over the years. The rate of profitability
of the business is also creditable. The employees of the company are happy and
satisfied with their remuneration, working conditions, promotion policy etc. As a part
of its moral obligation, the company has taken many initiatives for providing
employment to especially abled persons and promoting literacy in the villages
adopted by it.
Identify and explain the various types of objectives of management being fulfilled by
Real Alliance Ltd by quoting lines from the paragraph.
List any two values that Real Alliance Ltd. wants to communicate to the society.
Answer:
 The various objectives of management being fulfilled by Real Alliance Ltd are stated
below:
o Organisational objectives: An organization strives to achieve multiple organisational
objectives, mainly:
o Survival: “It is able to earn adequate revenues to cover costs.”
o Growth: “Its capital base, number of employees and production turnover has
o increased manifolds over the years.”
o Profit: “The rate of profitability of the business is also creditable.”
o Personal objectives: These objectives relate to the needs of the employees of the
organization which must be given due consideration.
o “The employees of the company are happy and satisfied with their remuneration,
working conditions, promotion policy etc.”
o Social objectives: It is expected that every organization should undertake certain
initiatives for the welfare of the society at large.
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 “As a part of its moral obligation, the company has taken many initiatives for
providing employment to especially abled persons and promoting literacy in the
villages adopted by it.”
 The two value that Real Alliance Ltd. wants to communicate to the society are:
o Social welfare
o Respect for their employees
Question:38
Rajat is working as a Regional Manager in Tifco Ltd. Name the level at which he is
working. State any four functions he will perform as the Regional Manager in this
company.
Answer:
 Rajat, all of them are working at the middle level of management.

 The four functions that he will have to perform at this level are stated below:
o He has to ensure that his department has the necessary staff.
o He has to assign duties and responsibilities to the people in his department.
o He has to motivate the people in his department to achieve the desired objectives.
o He has to co-operate with the other departments for ensuring smooth functioning of
the organization.
Question:39
Vaibhav Garments Ltd/s target is to produce 10,000 shirts per month at a cost of Rs
150 per shirt. The production manager could achieve this target at the cost of ?160
per shirt. Do you think the production manager is effective? Give reasons for your
answer.
Answer:
 Yes, the production manager of Vaibhav Garments Ltd. is effective as he could

achieve the target to produce 10,000 shirts in a month.
Question:40
29
Mr. Nitin Singhania’s father has a good business of iron and steel. He wants to go to
the USA for his MBA, but his father thinks that he should join the business. On the
basis of emerging- trends, do you think that Mr. Singhania should send his son to the
USA? Give any three reasons in support of your answer.
Answer:
 Yes, according to me, Mr. Singhania should send his son to USA for his MBA because
management is being recognised as a profession to a great extent because of the
following reasons:
o Well defined body of knowledge: Management is considered to be a well-defined
body of knowledge that can be acquired through instructions. As a separate
discipline, it contains a set of theories and principles formulated by various
management experts. Moreover, it is taught in various schools and colleges all over
the world.
o Ethical code of conduct: Management, in practice, like other professions, is bound by
a code of conduct which guides the behaviour of its members. Therefore, acquiring a
degree in management will equip him with the good managerial, skills and approach.
o Service motive: A good management course will provide him an insight into the
multiple goals that an organisation should pursue. This knowledge will help him to
serve both the objectives of profit maximization and social welfare effectively for his
company.
Question:41
Hema is one of the most successful managers of her company, kobe Ltd. She uses
her creativity and initative in handiling challenging situations at work. The
knowledge gained by her during her student days at a renowed management
institute as well as through her observation and experience over the years os
applied by hema in a skillful manner in the context of the realities of a given
situation. She often reads books and other literatures in various fields of a
management to keep her knowledge updated.
a. an aspect of the nature of management is being highlighted in the
above description. Identify the aspect.
b. Explain any three features of the aspect identified in part A.
30
Answer
 (A) Management is a Art.

 (B) Three features that establish it as an art are:
o Existence of theroticial knowledge, as a art, in management tooo, there is a
lot of literature available in various areas of management which the manager
has to specialise in .
o Personalised application.: like in any art, in management too, a manager
applies his acquired knowledge in a personalised and unique manner . This
gives rise to different styles of management.
o Based on practice and creativity: management satisfies this criteria as
manager gains experience through regular practice and becomes more
effective.
31
Chapter 2 Principles of Mangement
Question :1
Sanchit, after completing his entrepreneurship course from Sweden returned to India
and started a coffee shop ‘AromaCoffeeCan’ in a famous mall in New Delhi. The
speciality of the coffee ship was the special aroma of coffee and a wide variety of
flavours to choose from. Somehow, the business was neither profitable nor popular.
Sanchit was keen to find out the reason. He appointed Sandhya, an MBA from a
reputed college, as a Manager to find out the causes for the same.
Sandhya took feedback from the clients and found out that though they loved the
special unique aroma of coffee but were not happy with the long waiting time being
taken to process the order. She analysed and found out that there were many
unnecessary obstructions in between which could be eliminated. She fixed a standard
time for processing the order. She also realised that there were some flavours whose
demand was not enough. So, she also decided to stop the sale of such flavours. As a
result within a short period Sandhya was able to attract the customers. Identify and
explain any two techniques of scientific management used by Sandhya to solve the
problem.
Answer
 The two techniques of scientific management used by Sandhya to solve the

problem are: (any two)
 Time study: It seeks to determines the standard time taken to perform a well-
defined job. The objective of time study is to determine the number of workers
to be employed, frame suitable incentive schemes and determine labour costs.
By using time measuring devices for each element of task the standard time is
fixed for the whole of the task by taking several readings.
 Simplification (Standardisation and Simplification): Simplification aims at
eliminating superfluous diversity of products in terms of varieties, sizes and
dimensions. It not only helps to reduce inventories but also save cost of labour,
machines and tools. Thus, it helps to increase turnover by ensuring optimum
utilisation of resources.
32
 Motion study: Motion study refers to the study of movements of limbs of a
worker while doing a particular task.
 It seek to divide all such movements into three categories namely :
o Motions which are required
o Motions which are unnecessary
o Motions which are incidental.
Thus, motion study helps to eliminate unnecessary movements of a work and
enables him to complete the given task efficiently.
Question :2
Nutan Tiffin Box service was started in Mumbai by the Mumbai Dabbawalas. The
Dabbawalas who are the soul of entire Mumbai aim to provide prompt and efficient
services by providing tasty homemade tiffin to all office goers at the right time and
place. The service is uninterrupted even on the days of bad weather, political unrest
and social disturbances. Recently, they have started online booking system through
their website ‘mydabbawala.com’. Owing to their tremendous popularity amongst
the happy and satisfied customers and members, the Dabbawalas were invited as
guest lecturer by top business schools. The Dabbawalas operate in a group of 25-30
people alongwith a group leader. Each group teams up with other groups in order to
deliver the tiffins on time. They are not transferred on frequent basis as they have to
remember the addresses of their customers. They follow certain rules while doing
trade—no alcohol during working hours; no leaves without permission; wearing
white caps and carrying ID cards during business hours.Recently, on the suggestion of
a few self-motivated fellow men, the dabbawalas thought out and executed a plan of
providing food left in tiffins by customers to slum children. They have instructed their
customers to place red sticker if food is left in the tiffin, to be fed to poor children
later.
State any one principle of management given by Fayol and one characteristic of
management mentioned in the above case.
Give any two values which the Dabbawalas want to communicated to society.
Answer:
 The relevant principle of management given by Fayol is:
33
o Stability of Personnel: The employee turnover should be minimized to maintain
organizational efficiency. Personnel should be selected and appointed after
due and rigorous procedure. After placement, they should be kept at their post
for a minimum fixed tenure so that they get time to show results. Any
adhocism in this regard will create instability/insecurity among employees.
They would tend to leave the organisation.
o (The other correct answers are principle of Discipline / Initiative / Espirit de
corps) The characteristic of management mentioned in the above case is:
o Management is goal oriented as it seeks to integrate the efforts of different
individuals towards the accomplishment of both organizational and individual
goals.
 (The other correct answers are management is intangible/ group
activity/dynamic)
 The two values that Dabbawalas want to communicate to society are:
o Concern for poor/ Humanity
o Responsibility
Question :3
Aapka Vidyalaya’ believes in the holistic development of students and encourages
team building through a mix of curricular, co-curricular and sports activities. On its
Founder’s Day, a stage performance had to be put up. A committee of ten prefects
was constituted to plan different aspects of the function. They all decided to use
recycled paper for decoration. There was a spirit of unity and harmony and all the
members supported each other. With mutual trust and a sense of belonging, the
programme was systematically planned and executed. Kartik, one of the prefects,
realised that the group had unknowingly applied one of the principles of
management while planning and executing the programme. He was so inspired by
the success of this function that he asked his father to apply the same principle in his
business. His father replied that he was already using this principle.
Identify the principle of management applied for the success of the programme.
State any two features of management highlighted in the above paragraph.
Identify any two values which ‘Aapka Vidyalaya’ communicated to society.
Answer:
34
 The principle of management applied for the success of the programme is
Espirit De Corps.
 The two features of management mentioned in the above paragraph are as
follows:
o Management is goal oriented as it seeks to integrate the efforts of different
individuals towards the accomplishment of both organizational and individual
goals.
o Management is pervasive as it is applicable to all types of organizations,
(economic, social, political) all sizes of organizations (small, medium, large) and
at all levels of management (top, middle and lower).
 The two values that ‘Aapka Vidyalaya’ communicated to society are:
o Responsibility
o Sustainable development.
Question :4
Pawan is working as a Production Manager in CFL Ltd. which manufactures CFL bulbs.
There is no class-conflict between the management and workers. The working
conditions are very good. The company is earning huge profits. As a policy, the
management shares the profits earned with the workers because they believe in the
prosperity of the employees.
State the principle of management described in the above paragraph.
Identify any two values which the company wants to communicate to society.
Answer:
 The principle of management described in the above paragraph is ‘Harmony,

not Discord’.
 Taylor emphasised that there should be complete harmony between the
management and workers instead of a kind of class-conflict, the manager
versus workers. To achieve this state, Taylor called for complete mental
revolution on the part of both management and workers. The prosperity for
the employer cannot exist for a long time unless it is accompanied by
prosperity for the employees and vice versa. He advocated paternalistic style of
management should be in practice.
 The two values that the company wants to communicate to the society are:
35
 Prosperity
 Sharing
Question :5
Telco Ltd. manufactures files and folders from old clothes to discourage the use of
plastic files and folders. For this, they employ people from nearby villages where very
less job opportunities are available. An employee, Harish, designed a plan for cost
reduction but it was not welcomed by the production manager. Another employee
gave some suggestions for improvements in design, but it also was not appreciated
by the production manager.
State the principle of management that is violated in the above paragraph.
Identify any two values that the company wants to communicate to the society.
Answer:
 The principle of management that has been violated in the above case is
Initiative. Initiative means taking the first step with self-motivation.
 The workers should be encouraged to develop and carry out their plans for
improvement. Suggestion system should be adopted in the organization.
 The two values that the company wants to communicate to the society are
o Concern for environment
o Providing job opportunities
Question :6
Voltech India Ltd. is manufacturing LED bulbs to save electricity. However, it is
running under heavy losses. To revive from the losses, the management shifts the
unit to a backward area where labour is available at a low cost. The management also
asks the workers to work overtime without any additional payments and promises to
increase the wages of the workers after achieving its mission. Within a short period,
the company starts earning profits because both the management and workers
honour their commitments.
Identify any two values that the company wants to communicate to the society.
Answer:
36
 The principle of management described in the above paragraph is ‘Discipline’.
Discipline- It refers to the obedience to organizational rules and the
employment agreement. It is necessary for the systematic working of the
organization. It requires good superiors at all levels, clear and fair agreements
and judicious application of penalties.
o Trust
o Sustainable development
Question :7
ABC Ltd. is engaged in producing electricity from domestic garbage. There is almost
equal division of work and responsibilities between workers and the management.
The management even takes workers into confidence before taking important
decisions. All the workers are satisfied as the behaviour of the management is very
good.
Identify any two values which the company wants to communicate to society.
Answer:
 The principle of management described in the above paragraph is

‘Cooperation, Not Individualism’.
 This principle is an extension of principle of ‘Harmony, Not Discord’. There
should be complete cooperation between the labour and the management
instead of individualism. Competition should be replaced by cooperation and
there should be an almost equal division of work and responsibility between
workers and management. Also, management should reward workers for their
suggestions which results in substantial reduction in costs. At the same time,
workers should desist from going on strike and making unreasonable demands
on the management
o Participation
Question: 8
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Nikita and Salman completed their MBA and started working in a multinational
company at the same level. Both of them worked hard and were happy with their
employer. Salman had the habit of back-biting and wrong reporting about his
colleagues to impress his boss. All the employees in the organisation knew about it.
At the time of performance appraisal, the performance of Nikita was judged to be
better than Salman. Even then their boss, Mohammed Sharif, decided to promote
Salman stating that being a female, Nikita would not be able to handle the
complications of a higher post.
Identify and explain the principle of management which was not followed by this,
multinational company.
Identify the values which are being ignored quoting the lines from the above
paragraph.
Answer:
 The multinational company didn’t follow the Principle of Equity. It emphasizes

kindliness and justice in the behaviour of managers towards workers. No
discrimination should be made by them on the basis of caste, creed, gender or
otherwise.
 The two values which are being ignored in the given case are:
o Honesty: “Wrong reporting about his colleagues to impress his boss.”
o Justice: “At the time of performance appraisal, the performance of Nikita was
judged better than Salman. Even then their boss, Mohammad Sharif, decided
to promote Salman.”
Question 9:
Hina and Harish are typists in a company having the same educational qualifications.
Hina gets Rs.3,000 per month and Harish gets Rs.4,000 per month as salaries for the
same working hours. Which principle of management is being violated in this case?
Name and explain the principle.
Answer:
 The principle of Equity has been violated in this case. It emphasises kindliness
and justice in the behaviour of managers towards workers. No discrimination
should be made by them on the basis of caste, creed, gender or otherwise.
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Question: 10
Neeraj is selected for the post of software developer in an IT Company. On the first
day of his joining Mehul, his project manager tells Neeraj that during the course of his
work he will come across many such opportunities which may tempt him to misuse
his powers for individual or family’s benefit at the cost of larger general interest of
the company. In such situations, he should rather exhibit exemplary behaviour as it
will raise his stature in the eyes of the company. Also, for interacting with anyone in
the company on official matters, he should adopt the formal chain of authority and
communication.
Identify and explain the various principles of management that Mehul is advising
Neeraj to follow while doing his job.
List any two values that Mehul wants to communicate to Neeraj.
Answer:
 The various principles of management that Mehul is advising Neeraj to follow

while doing his job are as follows:
 Subordination of Individual Interest to General
For example, in the following case, there is one head ‘A’ who has two lines of
authority under her/ him. One line consists of B-C-D-E-F. Another line of
authority under ‘A’ is L-M-N-O-P. If ‘E’ has to communicate with ‘O’, who is at
the same level of authority, then she/he has to traverse the route E-D-C-B-A-L-
M-N-O.
 This is due to the principle of scalar chain being followed in this situation.
However, if there is an emergency, then ‘E’ can directly contact ‘O’ through
‘Gang Plank’ as shown in the diagram.
 The two values that Mehul wants to communicate to Neeraj are:
o Honesty
o Self-restraint
 Interest: Through this principle, Fayol advocates that in all circumstances, the
interests of an organisation should take priority over the interests of any one
individual employee. This is essential because larger interests of the other
employees and the stakeholders i.e., owners, shareholders, creditors, debtors,
39
financers, tax authorities, customers and the society at large cannot be
sacrificed for the interest of any one person. For example, Mehul tells Neeraj
that he might get tempted to misuse his powers for his or his family’s benefit
and so he must display exemplary behaviour to raise his stature in the eyes of
the company.
 Scalar Chain: According to Fayol, the formal lines of authority from highest to
lowest ranks are known as scalar chain. He suggests that “The organisations
should have a chain of authority and communication that runs from top to
bottom and should be followed by managers and the subordinates.” However,
in order to ensure speedy communication during emergencies, Gang Plank is a
shorter route that has been provided. However, the superior has to be
informed later on.
Question: 11
Davinder is a class twelfth commerce student in a reputed school in Punjab. Satinder
is his elder brother who is doing his Masters in Hospital Administration from Delhi
after completing his B.Sc course. During vacations when Satinder comes home,
Davinder shows him the business studies project that he is preparing on the topic
‘Principles of Management’. Satinder tells him that these principles are also a part of
MBA course curriculum at the beginner’s level as they form the core of management
in practice. But he finds these principles different from those of pure science.
Outline the concept of principles of management.

Why does Satinder find the principles of management different from those of pure
science?
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Why do the principles of management form the core of management in practice?
Explain by giving any two points highlighting the importance of principles of
management.
Answer:
 The principles of management serve as a broad and general guideline for the
managerial decision making and action.
 Satinder finds the principles of management different from those of pure
science because the management principles are not as rigid as principles of
pure science.
 This is due to the fact that they deal with the human behaviour and thus, need
to be applied creatively in the light of given situation.
 The importance of principles of management is described below:
o Providing managers with useful insights into reality: The principles of
management provide the managers with useful insights into real world
situations and help them to enrich their knowledge, ability and understanding
of the diverse managerial situations and circumstances. It also enables the
managers to learn from past mistakes and conserve time by solving recurring
problems quickly.
o Optimum utilisation of resources and effective administration: The knowledge
of management principles enables the managers to foresee the cause and
effect relationships of their decisions and actions. As a result, it leads to
optimum utilisation of scarce resources by avoiding wastage associated with a
trial-and-error approach. Principles of management limit the boundary of
managerial discretion so that their decisions may be free from personal
prejudices and biases. This facilitates effective administration within the
organisation
Question: 12
Gurpreet is running a retail mart in Varanasi to provide various types of products of
daily use under one roof to the buyers. The employee turnover in his business is very
high and he is perpetually on a look out for new staff. The fact of the matter is that he
lacks managerial skills and assigns work to his employees on adhoc basis without
letting them settle down in a specific work. This approach of his creates a sense of
41
insecurity among the employees and they tend to leave the job very quickly.
However, he is a very god fearing person and offers fair wages to his employees so
they can afford a reasonable standard of living.
Identify and explain the principle of management which Gurpreet is unable to apply
and is perpetually on a look out for new staff.
“He is a very god fearing person and offers fair wages to his employees so they can
afford a reasonable standard of living.” Name and explain the relevant principle of
management will has been brought into effect by Gurpreet.
Answer:
 Stability of Personnel: Stability of personnel is principle of management which

Gurpreet is unable to apply and is perpetually on a look out for new staff.
According to Fayol, “Employee turnover should be minimised to maintain
organisational efficiency”. Personnel should be selected and appointed after
due and rigorous procedure. After placement, they should be kept at their post
for a minimum fixed tenure so that they get time to show results. Any
adhocism in this regard will create instability/insecurity among employees.
They would tend to leave the organisation.
 Remuneration of Employees: According to Fayol, the overall pay and
compensation should be fair and equitable to both employees and the
organisation. The employees should be paid fair wages so that they are able to
maintain at least a reasonable standard of living. At the same time, it should be
within the paying capacity of the company. This will ensure pleasant working
atmosphere and good relations between workers and management.
Question: 13
After finishing her BBA degree course, Tanya gets a job of Assistant Manager in a
retail company through the reference of her cousin Taruna who works in the same
company as a Senior Manager. Taruna decides to guide Tanya through her experience
by making her aware of the important facts about management in practice. She tells
her that neither the principles of management provide any readymade, straitjacket
solutions to all managerial problems nor they are not rigid prescriptions, which have
to be followed absolutely.
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In context of the above case :
Identify the two features of principles of management mentioned in the above
paragraph by quoting lines from the paragraph.
Why do the principles of management not provide readymade, straitjacket solutions
to all managerial problems?
Answer:
 The two features of principles of management mentioned in the above

paragraph are as follows:
o General guidelines: The principles of management are guidelines to action.
Since the real business situations are very complex and dynamic and are a
result of many factors, these principles do not provide readymade, straitjacket
solutions to all managerial problems. But the importance of principles cannot
be underestimated because even a small guideline may help to solve a given
problem.
o Flexibile: The principles of management are not rigid prescriptions which have
to be followed absolutely. They are flexible and can be modified by the
manager when the situation so demands. They give the manager enough
discretion to decide which principle should be used under what circumstances
as individual principles are like different tools serving different purposes.
 As the real business situations are very complex and dynamic and are a result
of many factors, the principles of management not provide readymade,
straitjacket solutions to all managerial problems.
Question:14
Raj and Simran are both qualified eye surgeons and good friends. After obtaining a
certificate of practice, they decide to persue a career of their own choice. Raj starts
an eye care centre in the city whereas Simran joins a government hospital in a small
village. They meet after a long time in a party. Raj invites Simran to visit his eye care
centre and she accepts his invitation. She observes at his clinic that there is a fixed
place for everything and everyone and it is present there so that there is no
hinderance in the activities pf the clinic. Also, Raj always tends to replace T with ‘We’
in all his conversations with the staff members. Later on Raj shares with her that he
43
always deals with lazy staff sternly to send the message that everyone is equal in his
eyes.
Identify and explain the various principles of management that Raj is applying for the
successful management of his eye care centre.
List any two values that Simran wants to communicate to the society by taking up a
job in a village.
Answer:
 The various principles of management that Raj is applying for the successful
management of his eye care centre are described below:
o Order: According to Fayol, “People and materials must be in suitable places at
appropriate time for maximum efficiency.” The principle of order states that ‘A
place for everything (everyone) and everything (everyone) in its (her/his)
place’. A sense of orderliness will lead to increased productivity and efficiency
in the organization.
o Espirit De Corps: According to Fayol, “Management should promote a team
spirit of unity and harmony among employees.” A manager should replace T
with ‘We’ in all his conversations with workers to promote teamwork. This
approach will give rise to a spirit of mutual trust and belongingness among
team members. It will also reduce the need for using penalties.
o Equity: According to Fayol, “Good sense and experience are needed to ensure
fairness to all employees, who should be treated as fairly as possible.” This
principle emphasizes on kindliness and justice in the behaviour of managers
towards workers. The managers should not discriminate against anyone on
account of gender, religion, language, caste, belief or nationality etc.
 The two values that Simran wants to communicate to the society by taking up a
job in a village are:
o Humanity
o Concern for poor
Question: 15
Hritik is desirous of setting up a small factory to manufacture different kinds of eco-
friendly packaging materials. He proposes to adopt a logical approach to his business
44
rather than hit and trial method as he knows that this can result in tremendous
saving of human energy as well as wastage of time and materials. He plans to adopt
paternalistic style of management in practice in order to avoid any kind of class-
conflict that may emerge between him and the workers. Moreover, he plans to seek
the opinion of his workers before taking any important decisions and also offers
incentives to them for providing valuable suggestions for the business.
Identify and explain the various principle of scientific management that Hritik plans to
apply in his business.
List any two values that he wants to communicate to the society by offering
eco¬friendly packaging material.
Answer:
 The various principle of scientific management that Hritik plans to apply in his
business are described below:
o Science, not Rule of Thumb: Taylor believed that there was only one best method to
maximise efficiency and it could be developed through scientific study and analysis.
This is because if the managers rely on personal judgment in attending to the work
related problems, it may suffer from the limitation of a trial and error approach.
Therefore, it is important for them to know what works and why does it work. For
this, they should adopt scientific method to substitute the ‘Rule of Thumb or hit and
trial method’ throughout the organisation.
o Harmony, Not Discord: In the paternalistic style of management, the employer takes
care of the needs of employees like a father. Taylor said that any kind of class
conflicts between the workers and the managers were not good; rather they must
realise that each one is important. Therefore, he emphasised that there should be
complete harmony between the management and workers. To achieve this, Taylor
called for complete mental revolution on the part of both management and workers
by transforming their thinking. The management should share the gains of the
company, if any, with the workers and at the same time, workers should work hard.
o Cooperation, Not Individualism: Through this principle, Taylor suggests that there
should be complete cooperation between the workers and the management instead
of individualism. This principle is an extension of principle of ‘Harmony, Not Discord’.
Both should realise the importance of each other. In order to replace the feeling of
45
competition with cooperation, the management should not close its ears to any
constructive suggestions made by the employees. Rather, the workers should be
rewarded for any of their valuable suggestions which results in substantial saving in
costs. Also, the workers should be taken into confidence by the management
whenever any important decisions are to be taken.
 The two values that Harit wants to communicate to the society by offering eco-
friendly packaging material are:
o Sense of responsibility
Question 16:
Study Buddy Pvt. Ltd.’ is company dealing in stationery items. In order to establish
standards of excellence and quality in materials and in the performance of men and
machines, the company adheres to benchmarks during production. Moreover, its
products are available in limited varieties, sizes and dimensions thereby eliminating
superfluous diversity of products.
Identify the technique of scientific management which has been adopted by ‘Study
Buddy Pvt. Ltd.’
Answer:
 Standardisation and Simplification of Work is the technique of scientific

management which has been adopted by ‘Study Buddy Pvt. Ltd.’
 Standardisation implies devising new varieties instead of the existing ones. It
refers to the process of setting standards for every business activity; it can be
standardisation of process, raw material, time, product, machinery, methods or
working conditions. These standards are the benchmarks which must be adhered
to during production. It helps to reduce a given line or product to fixed types,
sizes and characteristics, establish interchange ability of manufactured parts and
products, determine standards of excellence and quality in materials and of
performance of men and machines.
 Simplification aims at eliminating superfluous diversity of products in terms of
varieties, sizes and dimensions. It not only helps to reduce inventories but also to
save cost of labour, machines and tools. Thus it helps to increase turnover by
ensuring ‘optimum utilisation of resources. Most large companies like Samsung,
46
Toyota and Microsoft etc. have successfully implemented standardisation and
simplification.
Question: 17
Swaraj is running an office furniture showroom. Most of his clients are businessmen
and they prefer to buy goods on credit. Keeping this in mind, he has given the power
to the sales manager, Mr. Bhardwaj, to offer a credit period of only 20 days, while
negotiating a deal with a buyer. On a specific day, Mr. Bhardwaj finds that if he can
offer a credit period of 30 days as an exception to a prospective buyer, he is likely to
finalise a highly profitable deal for the business. So Mr. Bhardwaj requests Swaraj to
grant him additional authority for offering a credit period of 30 days in the interest of
the business. But Swaraj refuses to extend his authority and as a result, the deal is
not finalized.
Can Mr. Bhardwaj be held responsible for loss of the deal? Why or why not ? Give a
suitable reason in support of your answer.
Also, explain the related principle.
Answer:
 No, Mr. Bhardwaj cannot be held responsible for loss of the deal in the above
case as he was not given the necessary authority to carry out his responsibility.
There is an imbalance in authority and responsibility.
 The name of the related principle is Authority and Responsibility.
 Authority is the right to give orders and obtain obedience by the virtue of one’s
position in the organization. Responsibility is the obligation of a person to carry
out the assigned task to the best of one’s abilities and skills. There are two types
of authorities, namely the official authority, which is the authority to command,
and personal authority, which is the authority of the individual manager.
Authority is both formal and informal. According to Fayol, there should be
balance between the authority given and responsibility entrusted to an employee
so that he is able to carry out the assigned task. Any kind of imbalance in
authority and responsibility is not good for the organisation. If the authority
granted to an employee is less than what is required, he will ineffective in doing
47
his work. On the other hand, if the authority delegated to an employee is more
than what is required, he may tend to misuse it.
Question: 18
Rajeev is a middle lever manager. He keeps all his subordinates under a lot of
discipline. His employees however complain of wastage of time and efforts as they
feel that nothing is being assigned in a proper way and a proper place, also no proper
schedule is made for working. Which principle of management is violated here?
Answer:
 The principle of management which is violated here is the Fayol’s principle of
‘order’. Fayol’s principle of order says that everything has a place and
everything should be at its place.
Question 19:
A floor manager of a Mall is very capable as he utilises all the functions of
management. He lays stress on developing mutual trust and spirit of cooperation
amongst the employees. Under his guidance the employees admit that they learn a
lot and are able to meet their targets. This has led to increase in their salaries.
Identify the principle of Fayol followed by the floor manager in the above case.
Answer:
 Esprit De Corps
Question :20
Rajesh wants to become an ideal manager. For this he reads many management
books. After reading various broad and general guidelines he prepares f to apply
them and make his work more meaningful. The necessary outcome will be his
improved output.
Which concept of management has been highlighted here?
Answer:
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 The concept of management which is highlighted here is ‘principles of
management’. Management principles are the broad and general guidelines
which help employees in behavior and decision making.
Question :21
The plant superintendent of a company is very sad. When he was on leave he was
expecting his subordinates to take the remaining work to the finish. However he finds
a new way of dealing with this problem. He develops a system of suggestion building
from the side of workers. For this a suggestion/complain box is to be kept where the
workers can drop their advice and hence take steps from their side.
Which principle of management has been implemented here off late by the plant
superintendent?
Answer:
 The principle of Fayol—’initiative’ was initially not followed and the establishment
of suggestion/complaint box is a step in following it.
Question :22
Suresh works in a bulb manufacturing company. Each bulb which is manufactured is
of standard size and quality. Further if there is any unrequired type of bulb
manufactured then its production is stopped. Last month when the company came to
know that 10-watt bulbs were no more liked by customers, their production was
stopped. He works in the purchase department. His job is to purchase the filaments
required to make bulbs. This time when he purchases the filament, he gets the
instruction from the seller that some special care needs to be taken in the first hour
of fixing the filaments inside the bulb. Suresh knows this information should be given
immediately to the production department before the assembling process starts.
However, he finds that his company’s policies only allow him to give the message to
his immediate boss who will further pass this message to his boss. The passing of this
message will continue till it reaches the desired person in the production
department.
Which technique of management is followed here? Also name the principle of
management followed here by the company. Which option is now available to Suresh
49
since the company is not allowing him to interact with the concerned worker in the
production department?
Answer:
 The technique of management which is followed here is Standardisation (Each

bulb which is manufactured is of standard size and quality)
and Simplification (Further if there is any unrequired type of bulb manufactured
then its production is stopped).
 The principle of management which is followed here is Scalar Chain. However he
finds that his company’s policies only allow him to give the message to his
immediate boss who will further pass this message to his boss.
 The option which is now available to Suresh is the use of Gang Plank as this is an
emergency situation. Suresh knows that this information should be given
immediately to the production department.
Question :23
Every year a meeting is organized in the lawns of the owner of a company. In this
meeting the owner of the company grants some funds for the benefit of the families
of the employees. The employees on the other hand never resist any change or put
excessive demands. The general environment in the company is very supportive to
the employees. The employee turnover ratio is very low.
Which concept of management is discussed here? Which principle of management
will be easily followed here?
Answer:
 The concept of management discussed here is Mental Revolution. The owner of

the company grants some funds for the benefit of the families of the employees.
The employees on the other hand never resist any change or put excessive
demands.
 Since the employee turnover ratio is low the principle of management which must
have been followed is ‘stability of personnel’. Whenever there is violation of this
principle of Fayol the employee turnover ratio increases. The increased employee
turnover ratio is not good for an organisation and should be minimised.
50
Question :24
Bhatkaav Enterprises is facing huge losses. The owner of the company is an MBA pass
out. Even then many things in the organisation are happening which are indicative of
lack of proper management in the company. First of all, there is no specific sharing of
work and any time any employee is asked to do anything. This has lead to wastage of
efforts. Further due to negligence in proper work sharing there has been no
specialisation development in the nature of the jobs done by the employees.
There are no clear and fair agreements between the workers and the management.
This has led to a lot of frustration in the workers. Management has quite often been
found to be ignorant of not fulfilling promises done by it. There are also no strict rules
and regulations binding on the conduct of the workers.
The departmental heads who are the middle level managers in the company and hold
key positions always favour their relatives. They quite often don’t turn up for job on
time. They are always looking for special relaxations from the top management. This
has led to feeling of resentment among the employees who are also demanding
special favours and threatening strike in the coming days.
Identify the three principles of Fayol violated in the above case.
Answer:
 In the first paragraph of the case the principle of Fayol which is violated is
‘Division of Work’. In the second paragraph of the case the principle of Fayol
which is violated is ‘Discipline’.
 In the third paragraph of the case the principle of Fayol which is violated
is ‘Subordination of individual interests to general interests.
Question :25
Ramesh is the owner of a printing press. The size of his organisation has y/increased
during the recent past. There are many employees who work in his organisation. The
organisation is considered good and has earned a lot of reputation in the market.
However when it comes to making key decisions in the organisation related to many
things he never considers the opinions of his subordinates. Even though the size of
the organisation has increased yet he tries to take all the key decisions on his own.
Which principle of Fayol has been violated by him?
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Answer:
 The principle of Fayol which has been violated here is ‘Centralisation and
Decentralisation’. This principle explains the need of balance between
Centralisation and Decentralisation. He is making all the decisions on his own and
he is not giving any decision making authority to his subordinates so he is not
following this principle.
Question :26
Mohan works on the floor of a mall as a manager. He is very hard working but is
unable to produce results for his organisation. His target for last month was a sale of
10 lakh rupees from his floor. However, by the end of the month the sale was only 8
lakh rupees. He is very regular and takes all the necessary steps to complete the
target. However, his staff is not as competent as he himself is. When he tries to take
action against disobedient employees the top management doesn’t allow him to do
so. They haven’t given him the power to fire employees or take any strict action
against them.
Which principle of Fayol is violated here by the Organisation?
Answer:
 The principle of Fayol which is violated here is ‘Authority and Responsibility’. The
amount of responsibility put on the shoulders of the floor manager is not in
proportion to the amount of authority given to him. He can’t take any strict action
against his subordinates .
Question :27
Enlightened Souls Pvt. Ltd. is a tube light manufacturing company. Before the start of
the year, they had promised their employees for bonus for extra production. It was
also decided that those who will put extra time will be paid extra according to the
number of hours. However, people in the HR department who worked very hard later
complained that they were not compensated for the extra number of hours that they
used to stay in the office.
Which principle of Fayol is violated here?
52
Answer:
 The principle of Fayol which is violated ‘Discipline’.
Question :28
Rohan and Amit are working in the purchase department of a company. Rohan is the
brother-in-law of the managing director of the company whereas Amit has been
recruited from an external source. They both have been performing below average
for the last couple of months. Many people in the organisation talk about their lack of
responsibility. When the managing director of the company came to know about
their irresponsible behaviour he immediately suspended Amit but did not take any
action against Rohan.
Identify the principle of Fayol which has not been followed by the managing director
in the above case.
Answer:
 Equity
Question :29
Aditi who is heading the campus recruitment program of the firm that she is working
in, gets an immediate order from the marketing head of the organisation. Mr. Rupesh
asks her to hire only those candidates who have two year’s experience in the field of
marketing and offer them a higher package. Moments later when she is about to
enter the campus, she gets another call from the HR head who asks her to hire
candidates with zero experience. He gives her the logic that such candidates would
be expecting lower packages in comparison to the candidates having experience in
the industry.
Which principle of Fayol stands violated here? What is the immediate outcome of the
violation of this principle? State the principle.
Answer:
 The principle of Fayol which is violated here is ‘Unity of command’.

 The Unity of command states that an employee should take orders only from one
boss.
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 The immediate outcome of the violation of this principle is dual subordination.
Question :30
Enigma Coolers are the leading manufacturers in their area. They have decided to
increase the productivity of their workers. For this they have chalked out a plan. They
will be hiring operational managers who to work at the lower level of management.
They have decided to keep eight managers over a single worker. Thus every worker
will have to report to all these eight managers.
Which technique of scientific management is followed here? What will be the
benefit? Also tell which principle of Fayol will be violated here?
Answer:
 The technique of Scientific Management which is used here is Functional

Foremanship.
 The benefit will be that every worker cannot have all the qualities like
intelligence, special knowledge, energy, honesty, etc. Individually each of the
functional foremen like gang boss, speed boss, etc. will look after all these
qualities.
 The principle of Fayol which will be violated here will be principle of ‘Unity of
Command’ as a single worker will have to report to eight different people.
Question 31:
Work is Worship’ is a leading construction company. The organisation has grown

from strength to strength because of its innovative ideas and scientific approach of
working. Ten years back the organisation went through a revolution. All the
operations and activities were properly noticed and the standard time taken to
perform them was noted. This took a few months and now the company could find
out the amount of workers required and the number of days to be involved in the
various manufacturing processes. A year later they moved to another level by
considering the stress involved in the lives of the workers. The amount and frequency
of rest intervals in finishing a particular task were noted. This helped the company in
optimizing the rest intervals for the workers so that their outputs could be increased.
After six more months the company decided to reward the efficient workers. A
54
different rate of wage payment was decided for those workers who performed above
the standard. The standard was decided. This led to a revolutionary change in the
perspective of the workers who now started giving their full efforts in order to
increase their wages.
Which concept of management has been discussed in the above case? Name the
three types of this management concept highlighted above. Also identify the lines
where these types have been indicated.
Answer:
The concept of management which is discussed above in the whole case is Techniques of
Scientific Management.
 The various types of techniques used are:

 Time Study. All the operations and activities were properly noticed and the
standard time taken to perform them was noted.
 Fatigue Study. The amount and frequency of rest intervals in finishing a particular
task were noted.
 Differential Piece Wage System. A different rate of wage payment was decided for
those workers who performed above the standard.
Question :32
Sanchit, after completing his entrepreneurship course from Sweden returned to India
and started a coffee shop ‘Aroma Coffee Can’ in a famous mall in elhi. The speciality
of the coffee shop was the special aroma of coffee and a wide variety of flavours to
choose from. Somehow, the business was neither profitable nor popular. Sanchit was
keen to find out the reason. He appointed Sandhya, an MBA from a reputed college,
as a Manager to find out the causes for the same.
Sandhya took feedback from the clients and found out that though they loved the
special unique aroma of coffee but were not happy with the long waiting time being
taken to process the order. She analysed and found out that there were many
unnecessary obstructions in between which could be eliminated. She fixed a standard
time for processing the order.
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She also realised that there were some flavours whose demand was not enough. So,
she also decided to stop the sale of such flavours. As a result within a short period
Sandhya was able to attract the customers.
Identify and explain any two techniques of scientific management used by Sandhya to
solve the problem.
Answer:
 Sandhya has used the following two techniques of scientific management:

 Time Study. Time study aims at determining the standard time taken by a worker
of reasonable skill to perform a well defined job. For this purpose time measuring
devices are used and standard time is fixed for the task after taking several
readings. The main idea behind this is to determine the number of workers to be
employed, frame appropriate incentive schemes and determine labour cost.
 Simplification of Work. Simplification of work aims at eliminating superfluous
varieties, sizes and dimensions. The main idea behind is to eliminate unnecessary
diversity of products. It saves cost of labour, machines and tools. It leads to
reduction in stock and helps in fuller utilisation of equipment. Moreover, it leads
to an increase in turnover.
Question :33
A scientist working in a factory for the betterment of the operational aspect studied
all the steps involved in the manufacturing of the product. He very attentively noticed
all sorts of movements to arrive at a simpler way of doing all the activities possible.
With his hard work he was able to bring down the number of activities for the
manufacturing of the final product from 34 to 22. This work was able to bring down
the labour charges and decrease the total time of production. Thus he gave the
organisation an added advantage.
Which type of scientific technique is discussed here?
Answer:
 The type of scientific technique discussed here is Motion Study.
Question :34
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ABCDEF is a world renowned retail chain store. The customers here are very much
pleased with the products and services provided in the stores. The customer
satisfaction and internal efficiency indicator of the organisation is rated best in the
industry. However there have been a few steps taken by the organisation which
provide the organisation this edge. The organisation has used a special type of
software which integrates all the stores and brings uniformity in its billing and
working pattern.
Which principle of management is mentioned here?
Answer:
 The principle of management which is followed here is ‘Science not Rule of

Thumb’ as the organisation tries to bring uniformity in its approach.
Question :35
Star Limited is a garment manufacturing company which has been performing quite
well. The company got a major order of 2000 shirts which it is supposed to
manufacture and supply within two weeks time. On an average the company
manufactures around 50 to 60 shirts in a day. Therefore, it is a very challenging task
for the organisation. The management of the company asked its labour to put in
extra hours without any additional payment to achieve this objective. In return,
management has promised the workers that their wages will be increased on a
permanent basis as soon as the project is over. The labour agreed to the
management’s proposal and completed the assigned task within the allotted time
frame. As per its promise the management increased the wages of the workers and
the project became a great success. Both management and labour honoured their
commitment.
Identify the principle of Henri Fayol which has been highlighted in the above case.
Answer:
 Discipline
Question :36
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We are the Best’ Public School though is a disciplined organisation, It lacks well
defined rules and regulations. With passage of time the management of the finds out
that if there are proper rules and regulations for the students and the teachers the
result of the school improves.
Which nature of principles of management is highlighted here?
Answer:
 The nature of principle of management which is highlighted here is ‘Principles of

management are formed by practice and experimentation’.
Question :37
Wellness Water Purifier has seen a lot of ups and downs during last five years as a
company. The most important learning the company has got is through its
experiences. First three years of its existence were full of high employee turnover.
The blames quite often put by the leaving employees was that of partial behavior
whether it was concerned with salary, management, duty assignment, leaves, and the
list can go on. Later the management after a brainstorming session realised that it
was wrong in committing partial behavior towards its employees. Next two years it
adopted the Fayol’s principle of ‘Equity’ in letter and spirit.
Which nature of principle of management has been highlighted in the above case?
Answer:
 In the above case the company has learned from its experience on the basis of
practice and experimentation that the principle of ‘Equity’ should be adopted to
avoid problems and increase its output. Thus in the above case the nature of
principle of management highlighted is that Management principles are formed
by practice and experimentation.
Question :38
Kona Kona construction is a well known firm. It has many employees. Its core
competence is in construction work but it has many other operations to tackle also.
These operations are connected to public relations, advertising, finance, etc. With
changing times the company has decided to outsource these services from the
experts, of these fields. Thus it has decided to save time and concentrate on its main
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business. There is team of civil engineers who form the main body of the decision
group. This group takes decision related to future construction projects after making
thoughtful and justifiable conclusions. The newspapers of the country have also
appreciated the efforts made by Kona Kona construction in giving better housing
facilities to the people in general. Company wants to walk shoulder to shoulder with
other international firms in the industry. For this it time and again prepares its
employees through proper training modules which educate them about the changing
situations at the global level. The net worth of the company is expected to touch ?
20,000 crores this year which is going to be a landmark achievement in the history of
this firm. The company is also ranked high in fulfilling Corporate Social Responsibility
initiatives.
Which points of importance of principles of management have been highlighted in
the above case? Also identify the lines.
Answer:
 The points of importance of principles of management which are highlighted in

the above case:
 Meeting changing environment requirements. With the changing times the
company has decided to outsource these services from the experts of these fields.
 Scientific decisions. This group takes decision related to future construction
projects after making thoughtful and justifiable conclusions.
 Management training, education and research. For this it time and again prepares
its employees through proper training modules which educate them about the
changing situations at the global level.
 Fulfilling social responsibility. The Company is also ranked high in fulfilling
Corporate Social Responsibility initiatives.
Question :39
VLPS Hotels is a disciplined organisation. It has many branches. The organisation tries
to apply discipline in all its branches with equal effectiveness.
However it knows that the nature and location of different branches are different.
They work under the impact of different cultures and work environments. Even then
discipline as an important management principle is applied to all its branches —big or
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small, within the country or at foreign locations. Recently it formed a special body of
five members to do research on cross functional expertise. The organisation has
learnt through the experience of the competitors that understanding among various
functional departments is important for increasing the productivity of the
organisation. So broadly it can be understood how such body is going to affect the
organisation through others’ experience. When it comes to remuneration of
employees the organisation adopts payment of different salaries for the same post.
The logic given by the organisation is that remuneration is based on situations and
depends upon the employee’s capacity and the expenses involved in a particular city.
Which natures of principles of management have been highlighted in the above case?
Answer:
 The natures of principles of management highlighted above are:

 Universal Applicability. The principles of management can be applied to all types
of organisations and their branches regardless of their sizes and nature. However
they should be applied with some change. Even then discipline as an important
management principle is applied to all its branches—big or small, within the
country or at foreign locations. .
 Cause and Effect relationships. A cause and effect relationship is established by
the management principles. However this cause and effect is exact as conditions
are not same and differ. So broadly it can be understood how such body is going
to affect the organisation through others’ experience.
 Contingent. A principle of management is applied according to a given situation.
The logic given by the organisation is that remuneration is based on situations
and depends upon the employee’s capacity and the expenses involved in a
particular city.
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Chapter 3 Business Environment
Question :1
Naman and Govind after finishing their graduation under vocational stream decided
to start their own travel agency which will book Rail Tickets and Air Tickets on
commission basis. They also thought of providing tickets within ten minutes through
the use of internet. They discussed the idea with their Professor Mr. Mehta who liked
the idea and suggested them to first analyse the business environment which consists
of investors’, competitors and other forces like social, political etc. that may affect
their business directly or indirectly. He further told them about the technological
improvements and shifts in consumer preferences that were taking place and hence
they should be aware of the environmental trends and changes which may hinder
their business performance. He emphasised on making plans keeping in mind the
threat posed by the competitors, so that they can deal with the situation effectively.
This alignment of business operations with the business environment will result in
better performance.
Identify and state the component of business environment highlighted in the above
Para.
State any two features of business environment as discussed by Professor Mehta
with Naman and Govind.
Also state two points of importance of business environment as stated by Professor
Mehta in the above situation.
Answer:
 Technological Environment is the component of business environment

highlighted in the above Para. Technological Environment includes forces
relating to scientific improvements and innovations which provide new ways of
producing goods and services and new methods and techniques of operating a
business.
 The two features of business environment as discussed by Professor Mehta
with Naman and Govind are as follows:
o Dynamic nature: It is dynamic in nature and keeps on changing due to
technological upgradations, shifts in consumer preferences or increase in
competition in the market.
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o Inter-relatedness: All the elements of business environment are closely
interrelated. Therefore, any change is one element may necessitate
corresponding changes in the other elements as well.
 The two points of importance of business environment as stated by Professor
Mehta in the above situation are described below:
o It enables the firm to identify opportunities and getting the first mover
advantage: The dynamic business environment provides numerous
opportunities for a business to evolve as per the changing needs. Therefore,
early identification of the forthcoming opportunities helps an enterprise to be
the first to exploit them instead of losing them to the competitors.
o It helps the firm to identify threats and early warning signals: Sometimes the
changes in the external environment may pose as a threat and hinder a firm’s
performance. An awareness about the business environment helps the
managers to identify such threats on time and take necessary decisions and
action.
Question 2:
Accent Electronics Ltd.’ was operating its business in Malaysia. The company started
exporting its products to India when the Prime Minister announced relaxation in
import duties on electronic items. The company appointed retailers in India who had
direct online links with the suppliers to replenish stocks when needed.
Identify and explain the dimensions of business environment discussed in the above
case.
Answer:
 The various dimensions of business environment being referred to in the above

case are as follows:
o Political Environment: Political Environment includes political conditions such
as general stability and peace in the country and specific attitudes that elected
government representatives hold towards business.
o Technological Environment: Technological Environment includes forces relating
to scientific improvements and innovations which provide new ways of
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business.
Question :3
As per the directions issued by the Supreme Court, the government passed an order
to ban the sale of tobacco products within the area of 200 meters of all educational
institutions as:
Its consumption is injurious to health.
People are becoming more conscious about health and fitness. This indicates the
government’s attitude towards this business.
Identify the business environment under three different dimensions by quoting from
above paragraph.
Answer:
 The various dimensions of business environment being referred to the in the

above case are as follows:
o Legal Environment: “As per the directions issued by the Supreme Court.’
o Political Environment: “The government passed an order to ban the sale of
tobacco products within the area of 200 meters of all educational institutions.”
o Social Environment: “Its consumption is injurious to health and people are
becoming more conscious about health and fitness.”
Question :4
The court passed an order to ban polythene bags as:
These bags create many environmental problems which affect the life of people.
Society at large is more concerned about the quality of life.
The government decided to give a subsidy to the jute industry in order to promote
this business. As a result, —
Innovative techniques are being developed to manufacture jute bags at low rates.
Incomes are rising and people can afford to buy these bags.
Identify the different dimensions of business environment by quoting lines from the
above particulars.
Answer:
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o Legal Environment: “The court passed an order to ban polythene bags.”
o Social Environment: “The bags create many environmental problems which
affect the life of people and society at large is more concerned about
the,,quality of life.”
o Political Environment: “The government decided to give a subsidy to the jute
industry in order to promote this business.”
o Technological environment: “Innovative techniques are being developed to
manufacture jute bags at low rate.”
o Economic Environment: “Incomes are rising and people can afford to buy these
bags.”
Question :5
The Government of India is seriously thinking of allowing the oil-marketing public

sector undertaking to fix their own prices for petrol and diesel. Which economic
reform is the reason for this change in the government’s policy?
Answer:
 Privatization as a reform is the reason for this change in the government policy.
Question :6
Just after the declaration of the results of the Lok Sabha Elections, 2009, the Bombay
Stock Exchange’s price index (Sensex) rose by 2100 points in a day. Identify the
environmental factor which led to this rise.
Answer:
 Political environment has led to the rise in the Sensex.
Question :7
Post demonetization in a further push to cashless economy, the Central cabinet has
recently approved the ordinance for paying wages via electronic means. Accordingly,
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the government approved to Amend Section 6 of the Payment Of Wages Act 1936, to
allow employers of certain industries to make payment through the electronic mode
and cheques. The new ordinance will be applicable to the public sector. Identify the
various dimensions of business environment which relate to the above-mentioned
case.
Answer:
 The various dimensions of business environment which relate to the above-

mentioned case stated below:
o Political environment
o Legal environment
o Technology environment
Question :8
Make in India is an initiative launched by the Government of India to encourage
national and multinational companies to manufacture their products in India. It
focuses on job creation and skill enhancement and is in twenty-five sectors of the
economy. Under the initiative, brochures on these sectors and a web portal were
released. The initiative aims at high quality standards and minimizing the impact on
the environment. It also seeks to attract foreign capital investment in India.
Identify the various dimensions of business environment being referred to by quoting
lines from the paragraph.
List any two values which the Government of India wants to convey through this
initiative.
Answer:

o Political Environment: “Make in India is an initiative launched by the
Government of India to encourage national and multinational companies to
manufacture their products in India.”
o Technological Environment: “Under the initiative, brochures on the twenty five
sectors and a web portal were released.”
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o Economic Environment: “It also seeks to attract foreign capital investment in
India.”
 The two values which the Government of India wants to convey through this
initiative are:
o High quality standards
Question: 9
India’s retail sector has been undergoing structural changes for the last two decades.
On one hand, the ‘mall culture’ has gradually become a way of life, especially in the
metros and mini¬metros. On the other hand, there is accelerated growth in e-
business as customers also prefer to buy products and services via the Internet,
telephone and television. However, operating in either of the segments is marked by
the presence of strong competitors.
Identify the components of specific forces and general forces being discussed in the
above paragraph.
Answer:
 The components of specific forces discussed in the above paragraph are the
customers and competitors.
 The components of general forces discussed in the above paragraph is the
social and technological conditions.
Question :10
Kapil Sharma is working as the Country Head of a company which owns a chain of
malls under the name of ‘Virtuoso’ in the various parts of India. Through an analysis
report of the business environment, it has been brought to his notice that in the
coming years, shopping at a mall will not be a necessity for the buyers as purchases
can be made online from anywhere
and at any time with ease and at the consumer’s convenience. Hence, malls will have
to provide much more than shopping to be able to attract customers. So, he
recommends that ‘Virtuoso’ malls should be restructured into recreation centers,
66
offering more spaces to socialize, host events and concerts, and provide ample Food
and Beverages options.
Consequently, the share of entertainment segment and Food and Beverages segment
in the overall mall space is increased by 20%. As a result, the company gains
enormously by getting the first mover advantage.
Define the term ‘Business Environment’.
Explain the terms ‘Threats’ and ‘Opportunities’ by quoting lines from the paragraph.
Answer:
 The term ‘Business Environment’ means the sum total of all individuals,
institutions and other forces that are outside the control of a business
enterprise but that may affect its performance.
 The term ‘Threats’ refers to the external environment, trends and changes that
will hinder a firm’s performance.
 “Through an analysis report of the business environment, it has been brought
to his notice that in the coming years, shopping at a mall will not be a necessity
for the buyers as purchases can be made online from anywhere and at any
time with ease and at the consumer’s convenience. Hence, malls will have to
provide much more than shopping to be able to attract customers.”
 The term ‘opportunities’ refers to the positive external trends or changes that
will help a firm to improve its performance.
 “As a result, the company gains enormously by getting the first mover
advantage.”
Question :11
"Zero Defect Zero Effect” (ZED) is a slogan coined by the Prime Minister of India,
Narendra Modi with reference to the Make in India initiative launched by the
government. The slogan reflects the efficiency of production processes, i.e., the
products have no defects and the process through which the product is made has
zero adverse environmental and ecological effects. The ZED model aims to make India
the manufacturing hub of the world and prevent the products developed in India
from being rejected by the global market. Moreover, before the initiative was
67
launched, the limits of foreign direct investment in various sectors had been relaxed.
The application for licenses was made available online and the validity of licenses was
increased to three years. Various other norms and procedures were also relaxed by
the government. In the light of the above paragraph, identify and explain the major
component of New Economic Policy of 1991 that are being referred to by quoting
Answer:
 The major components of New Economic Policy of 1991 that are being referred
to are as follows:
o Liberalization: These economic reforms signalled the end of the licence-permit-
quota raj and were aimed at liberalizing the Indian business and industry from
all unnecessary controls and restrictions.
o “Moreover, before the initiative was launched, the limits of foreign direct
investment in various sectors had been relaxed. The application for licences
was made available online and the validity of licences was increased to three
years. Various other norms and procedures were also relaxed by the
government.”
o Globalization: Globalization means the integration of the various economies of
the world leading towards the emergence of a cohesive global economy.
o “The ZED model aims to make India the manufacturing hub of the world and
prevent the products developed in India from being rejected by the global
market.”
Question :12
It is interesting to know that the menu items of the multinational food chains are
customized to suit the general palates of the local people in the region. When
McDonald’s started its business in India in the year 1996, the company went through
a complete localization strategy. McDonald’s changed its product menu to
accommodate the vegetable burger given the large vegetarian population. It also
altered its store design and even reduced the product price by close to fifteen per
cent. Also, the “McAloo Tikki burger” is not available anywhere but in the Indian
outlets of McDonalds.
Identify the relevant feature of business environment being discussed above.
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Answer:
 Relativity is the relevant feature of business environment which is being

discussed above
Question :13
In the year 2016, the State Government of Kerala had made it mandatory for
anganwadis hostels and canteens in educational institutions to secure the Food
Safety and Standards Authority of India (FSSAI) licence to ensure food safety. As the
educational institutions also get categorised as food business operators in the event
of the annual turnover of the hostels, they run exceeding Rs. 12 lakh per annum.
Identify and explain the various dimensions of business environment being referred
to here.
List any two values which the State Government of Kerala wants to convey through
this initiative.
Answer:

o Political Environment: Political environment includes political conditions such
as general stability and peace in the country and specific attitudes that elected
government representatives hold towards business.
o Legal Environment: Legal environment includes various legislations passed by
the government administrative orders issued by government authorities, court
judgments as well as the decisions rendered by various commissions and
agencies at every level of the government -Center, State or Local.
 The two values which the State Government of Kerala wants to convey through
this initiative are:
o High quality standards
o Good health
Question :14
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Postage stamps have been unveiled to commemorate 140 years of existence of the
country’s first stock exchange the Bombay Stock Exchange (BSE). The setting up of
BSE is considered to be the greatest revolution that took place in the financial
markets in India as it acts as a key driver for economic growth of a country. This is
due to the fact that there exists a strong correlation between economic growth and
capital accumulation.
Identify the dimension of business environment of India being referred here.
State any three factors which broadly affect the dimension of business environment
of India as identified in part (a) of the question.
Answer:
 Economic environment is the dimension of business environment of India

being referred here.
 The three factors which broadly affect the economic environment of India are
stated below:
o Stage of economic development of the country.
o The economic structure in the form of mixed economy which recognizes the
role of both public and private sectors.
o Economic planning, including five-year plans, annual budgets, and so on.
Question:15
The organic food market in India is growing at 25-30 per cent which reflects a clear
shift in consumer tastes and preferences. The current growth in the organic food
market is driven by multiplicity of factors like rising health consciousness, changing
lifestyles, increase in disposable income and growing availability of organic food
products in shopping malls, retail outlets and online.
Identify and explain the features of business environment being referred to here.
By quoting phrases from the paragraph identify the various components of general
forces which have led to a growth in the organic food market.
Answer:
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 The features of business environment being referred to in the above case are
as follows:
o Dynamic nature: It is dynamic in nature and keeps on changing due to
technological upgradations, shifts in consumer preferences or increase in
competition in the market.
o Inter-relatedness: All the elements of business environment are closely
interrelated. Therefore, any change is one element may necessitate
corresponding changes in the other elements as well.
 The various components of general forces which have led to a growth in the
organic food market are as follows:
o Social: “rising health consciousness, changing lifestyles”
o Economic: “increase in disposable income”
o Technological: “growing availability of organic food products in shopping malls,
retail outlets and online.”
Question :16
Anurag aspires to work with a socially and environmentally committed company as
he does not want to work just for monetary benefits but also the brand value of the
company, he works for in the society matters a lot to him. Therefore, he has joined
Cerebra Integrated Technologies a Bengaluru-based Infotech company. The company
has built India’s largest e-waste recycling plant. The company strives to be one of the
leading players in this business which has huge potential not only in terms of
generating huge revenues and profits but also wants to contribute to the
environment issues that have become crucial worldwide. The company sees big
business in the mountains of e-waste in Bengaluru which produces 200,000 tonnes of
e-waste a year. The company plans to make its millions by extracting metals such as
gold and platinum from the e-waste piling up in the city. As a mobile phone, for
example, is made up of a combination of rare earth and precious metals: it contains
250 mg of silver, 24 mg of gold and nine mg of palladium while a laptop has 1,000 mg
of silver, 220 mg of gold and 500 grams of copper.
To start the business, the company has obtained a licence from KSPCB (Karnataka
State Pollution Control Board).
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Identify the various dimensions of business environment being referred to by quoting
List any two values which the company wants to convey to the society.
Answer:
 The various dimensions of business environment being referred to the in the

above case are as follows:
o Technological Environment: Technological environment includes forces relating
to scientific improvements and innovations which provide new ways of
business.
o Administrative orders issued by government authorities, court judgments as
well as the decisions rendered by various commissions and agencies at every
level of the government— center, state or local.
o Social Environment: Social environment includes the social forces like customs
and traditions, values, social trends, society’s expectations from business, etc.
 The two values which the Cerebra Integrated Technologies wants to convey
through this initiative are:
o Concern for environment.
Question :17
The government wants to raise Rs.56,500 crore from the sale of stakes in state-
owned enterprises National Thermal Power Corporation (NTPC) in the financial year
2016-17.
Identify and explain the related concept.
Answer:
 Disinvestment: Disinvestment refers to transfer in the public sector enterprises

to the private sector through dilution of stake of the Government in the public
enterprise.
Question :18
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Bharat is running an ice cream parlour in a local market. Keeping in mind the
changing perceptions about health among the people, one of his employees Abhiraj
suggests to him that they should introduce a range a flavoured yogurt. Bharat accepts
his suggestion as a result both the image and the profitability of his business
increases.
Identify the feature of management which is being highlighted.
State the related dimension of the business environment.
Name and explain the related principle of general management.
Answer:
 The feature of management which is being highlighted is Dynamic.

 The related dimension of the business environment is Social.
 The related principle of general management is Initiative.
 Initiative means taking the first step with self-motivation. The workers should
be encouraged to develop and carry out their plans for improvement.
Suggestion system should be adopted in the organization.
Question :19
As a result of the decision by Britian to exit to European Union the new trade
agreements will come into force from the EU as it accounts for 35-40% of auto
component exports from India. Tata Motors owned Britain’s largest carmaker Jaguar
Land Rover (JLR) has been in Britain for three decades and makes 4,75,000 cars a year
in the country of which most of them are exported inside the European Union and
beyond. JLR estimates that their annual profit could be cut by one billion pounds
($1.47 billion) by the year 2020.
Explain why are all the elements of business environment considered to be closely
interrelated?
Name any two related dimensions of the business environment.
Answer:
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 All the elements of business environment are considered to be closely
interrelated as any change in one of them may necessitate a series of changes
in other dimensions as well.
 The related dimensions of the business environment are Political and Legal.
Question :20
Gallant’ is a well-known FMCG (Fast Moving Consumer Goods) company in India.

However, for the past few years its profitability is diminishing due to the presence of
a new company ‘Prakritik’. ‘Prakritik’ has gradually acquired a reasonable share in a
wide variety segments like soaps, shampoos, detergents, dish wash and oral care.
One of the key reasons is that ‘Prakritik’ has positioned itself as a natural/Ayurvedic
brand and this approach has worked well with the Indian consumer. In order to
compete with this threat ‘Gallant’ has acquired a premium Ayurvedic brand
‘Madhumita’ from another group. Moreover, its likely to increase its advertising
budget to counter the threat from ‘Prakritik’.
Identify the related component of the business environment which has contributed
effectively towards the success of Prakritik.
Also, state the two ways in which ‘Gallant’ has responded to the changes in its
business environment.
Answer:
 Social aspect is the related component of the business environment which has
contributed effectively towards the success of Prakritik.
 The two ways in which ‘Gallant’ has responded to the changes in its business
environment are as follows:
o Acquisition
o Brand building
Question :21
Bright Services is a taxi service provider. The company is targeting a revenue of 50
crore rupees this year. However, with the passage of time it has found entrance of
new service providers in the market which was not expected at one stage of time. It
74
has a good team of technicians, drivers, software providers, etc. The company has
decided to make it adaptable to such continuously changing circumstances. It knows
that if it has to expand in new countries it
will have to learn the basic differentiating factors like traffic rules, technological
aspects, etc. Thus, it understands that conditions are different in different countries.
Which features of Business Environment are discussed in the above case? Which
force is discussed above?
Answer:
 The various features of Business Environment which are discussed above are:
o Uncertainty. However, with the passage of time it has found entrance of new
service providers in the market which was not expected at one stage of time.
o Dynamic nature. The company has decided to make it adaptable to such
continuously changing circumstances.
o Relativity. Thus, it understands that conditions are different in different
countries.
 The type of force which is discussed above is General Force —Legal (Traffic
rules), Technological (Technical aspects).
Question :22
A company is a component of market. It utilises various raw materials, labour force,
human resources, power, water, other sources, etc. When all these resources are
utilized, output is produced. But before output is produced the input has to go
through various operations. These operations convert the raw materials into final
products which are then sold in the market.
In the above paragraph which importance of Business Environment is highlighted?
Answer:
 The importance of business environment which is highlighted above is — Helps

in tapping useful resources.
Question :23
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The market is flooded with better quality toys of foreign origin. The result is fall in
revenue of the indigenous or local companies as their products are much interior and
are also costlier in less demand in the market.
Which dimension of Business Environment can be seen here affecting the local
companies’ revenue?
Answer:
 The dimension of Business Environment which is affecting the indigenous

companies is Technological Environment. Since the products are
technologically advanced, they are replacing the locally made inferior products.
Question :24
The sale of sarees increases in the months of the year when a large number of
marriages take place in India. The saree manufacturing companies make special plans
of sale for these months.
Which dimension of business environment comes into picture here?
Answer:
 The dimension of business environment which is covered here is

the “Social” dimension of business environment as marriages come under the
social dimension.
Question :25
We can expect high sale of sarees in India, but we can’t expect the same in Which
feature of business environment is discussed in the previous line?
Answer:
 The feature of business environment which is discussed above is “Relativity” as

the business environment varies from place to place. The choice of people,
their culture and purchasing capacity
Question :26
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World Softwares” is a software giant. It has many branches throughout the world.
The company knows that it has great opportunities in its path. When it it was limited
only to its native country. With the passage of time within 20 years the economies of
various countries have integrated. This has come as a great advantage to this
company which has expanded. In many of the countries where it has its, branches the
control of government in the public sector enterprises has diluted leading to more
control in the hands of the private sector. One of the major reasons for the success of
the company has been the role of the initiator the company has played as it was the
first company of its kind to enter the market.
Identify the two important concepts highlighted above. Which type of advantage has
been indicated in the last line of the above case?
Answer:
 Globalisation. With the passage of time within 20 years the economies of

various countries have integrated.
 Disinvestment. In many of the countries where it has its branches the control
of government in the public sector enterprises has diluted leading to more
control in the hands of the private sector.
 First mover advantage. The role of the initiator the company has played as it
was the first company of its kind to enter the market.
Question :27
Metlapp Networks and Technologies Ltd. is a leader in technology innovation in the
United States, creating products and solutions for connecting the world. It has a large
research and development team which invented the first smart watch, named as W-
7. The watch besides showing the time, also monitors few health parameters like
heartbeat, blood pressure etc.
While in search of markets abroad, the company found that in India, the reform
process was underway with the aim of accelerating the pace of economic growth. The
company decided to take advantage of simplified export procedure and removal of
quantitative as well as tariff restrictions in India.
It set up its office in Jamnagar with a view to capture the Indian market. In a short
span of time, the company emerged as a market leader.
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Success of the company athtected many other players to enter the market.
Competition resulted in reduction in prices, thereby benefiting the customers.
In the above paragraph, two major concepts related to government policy have been
discussed. Identify and explain these concepts.
Also, explain briefly any three impacts of these concepts on Indian business and
industry.
Answer:
 The two major concepts related to government policy discussed in the given
para are as follows:
o Liberalisation. Liberalisation means removing unnecessary control and
restrictions over the business. It refers to those government policies that
promote economic growth by lessening the restrictions and regulations placed
on the business.
o Globalisation. It is an economic reform that aims at integration of markets in
the global economy leading to the increased inter-connectedness of national
economies. It simply means the integration of the various economies of the
world leading towards the emergence of a cohesive global economy.
 Three impacts of liberalisation and globalisation on Indian business.
o Increase in competition. In today’s Indian economy, competition has increased
due to liberalised imports and entry of MNCs (foreign Multinationals).
Although, it is good for consumers, but some of the Indian industrial units,
particularly small-scale and medium scale industries are facing problems.
o More demanding customers. Customers are well informed and so they have
become more demanding. They have a wider choice and can now purchase
better products and services.
o Technological development. Increasing competition has forced the companies
to develop new technologies. New technologies make it possible to improve
machines, production process, products and services. The rapidly changing
technological environment has created tough challenges before small firms.
o Necessity for change. Since Economic Reforms of 1991 market forces have
been changing rapidly. Therefore, business firms have to continuously modify
their operations.
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o Need for developing human resources. The new market conditions require
people with higher qualifications, competence and greater commitment.
Hence there is a need to train and upgrade human resources.
Question :28
The Indian companies after the year 1991 have especially paid attention to the need
of having a manpower which can adjust to the changing competitive environment.
The new market situations require employees with greater talent and higher level of
competence.
In the above paragraph which one important impact of Government policy change on
business is highlighted?
Answer:
 Need for developing human resource.
Question :29
ABCDE Ltd. has opened a customized shoe business in 23 cities. The organisation has
done a lot of research on the nature of business environment in which it is doing
business. The market has fragmented as there are many players, brand loyalties of
the customers keep on changing, customers are more demanding and there is
intense competition in the market. Every week on Saturday the board of directors sits
for a meeting and decides the future course of action. They rely on their surveys and
past performances of other companies to achieve policy making and deciding future
course of action. The company devotes its lot of time in understanding the external
environment. With all the research the company has realised that the business
environment does tend to have a lot of impact on the organisation so it is necessary
to continuously monitor it.
Name the various importance of management highlighted above?
Answer:
 The various importance of business environment highlighted above:
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o It helps in coping with rapid changes. The market has fragmented as there are
many players, brand loyalties of the customers keep on changing, customers
are more demanding and there is intense competition in the market.
o It helps in planning and policy formulation. They rely on their surveys and past
performances of other companies to achieve policy making and deciding future
course of action.
o It helps in improving performance. With all the research the company has
realised that the business environment does tend to have a lot of impact on
the organisation so it is necessary to continuously monitor it.
Question :30
A greeting card making company in USA is flourishing well. The company makes cards
for different occasions. During the time of Christmas and New Year, the production
and selling of cards reaches a new high. The company exists in an environment which
is democratic and there are rules for every business firm. Once you step out of the
company there are customers, competitors, government authority and almost
everything one can think of. The company appears to have a promising future.
However the
firm will have to understand the close relationship between various elements of the
business environment around it.
In the above case which dimension of business environment is highlighted? Which
features of business environment are highlighted in the above case?
Answer:
 The dimension of business environment which is highlighted above

is “Social”. The Company makes cards for different occasions. During the time
of Christmas and New Year Eve. The production and selling of cards reach a
new high.
 The features of business environment which are highlighted above are:
o Totality of external forces. Once you step out of the company there are
customers, competitors, government authority and almost everything you can
think of.
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o Inter-relatedness. However the firm will have to understand the close
relationship between various elements of the business environment around it.
Question:31
GHJ Private Ltd. is concerned about the external environment of business. It is busy
analyzing various factors which are going to affect its business. However with a lot of
understanding it developed about the business it found two types of factors; one
which affected the firm directly and the other which affected all the firms in the
business. With the passage of time the challenges for the company have increased.
The company finds new competitors and technological challenges which are posing
new changes for it. The company at the end of the year decides to have a survey. This
survey is about knowing the business environment properly. Even after spending a lot
of money on the surveys the company comes to conclusion that it’s not easy to
understand the business environment and it is properly understood only in parts. The
company is ready to seek advice from experts and is eager to notice changes in the
business environment. When a multinational company enters the market, the
company is eager in taking preventive measures like improving the product,
aggressive advertising, etc. A special team of experts have been created. The team
observes the changes taking place like changing branding loyalty, more demanding
customers, etc. as it knows the pace of change is more important than the change
itself. The painstaking efforts of the company don’t go unrewarded. The company by
the end of the year makes huge profit and by understanding the business
environment is able to increase its revenue.
Which features of business environment have been highlighted in the above case?
Also identify the various importance of business environment highlighted above.
Answer:
 The various features of business environment which are highlighted in the

above case are:
o Specific and general forces. However with a lot of understanding it developed
about the business it found two types of factors; one which affects the firm
directly and the other which affected all the firms in the business.
o Dynamic nature. The Company finds new competitors and technological
challenges which are posing new changes for it.
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o Complexity. Even after spending a lot of money on the surveys the company
comes to a conclusion that it’s not easy to understand the business
environment and it is properly understood in parts.
 The various benefits of business environment highlighted in the above case
are:
o It helps the firm to identify threats and send early warning signals. When a
multinational company enters the market, the Company is eager in taking
preventive measures like improving the product, aggressive advertising, etc.
o It helps in coping with rapid changes. The team observes the changes taking
place like changing branding loyalty, more demanding customers, etc. as it
knows the pace of change is more important than the change itself.
o It helps in improving performance. The Company by the end of the year makes
huge profit and by understanding the business environment, is able to increase
its revenue.
Question :32
Runners Ahead’ is an emerging software consultancy company. The a specific manner
but political, social and economic conditions affect it in a general way. The company
has decided to prepare an emergency plan to meet unpredictable challenges which
change the business in a very fast manner particularly in the field of Information
Technology. The changes in the IT sector are very fast. So the chances of success are
high; like in the case of new software launched where the company has the
advantage of entering the market early. However, things are not so easy. Every time
circumstances pose new challenges. The organisation has decided to monitor the
external business environment so that it can adopt suitable measures to increase its
client base.
Recently the company has been given a project by the government to study and
analyse its new policy. The policy of the government is to give a bigger role to the
private sector by reducing its own role in the Public Sector Undertakings.
In order, to meet new challenges the company has to exploit various aspects of
business. Recently it has invented a new type of advanced software for social
networking sites for the aged people catering to their specific needs. The company is
expecting huge rise in its revenue through the help of this project.
Which features of business environment is highlighted in the above case?
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Identify the importance of business environment highlighted in the above case.
Which economic reform is highlighted in the above case in the second paragraph of
the above case?
WTiich dimension of business environment is highlighted in the above case?
Answer:
 Recently the company has been given a project by the government to study
and analyse its new policy. The policy of the government is about giving a
bigger role to the private sector by reducing its own role in the Public Sector
Undertakings.
 In order, to meet new challenges the company has to exploit various aspects of
business. Recently it has invented a new type of advanced software for social
networking sites for the aged people catering to their specific needs. The
company is expecting huge rise in its revenue through the help of this project.
Question :33
‘Shaktishali Steel’ is a steel manufacturing company. The owner’s brother is a director
in a public sector undertaking. He advises his brother to make his company run
properly otherwise they can also face the same result which less performing PSU’s
have faced. The Public Sector Undertakings now have changed and are trying to
generate high revenues for their own functioning, as the government support has
declined.
In the above case which impact of government policy changes on business has been
highlighted?
Answer:
 Loss of budgetary support to the public sector.
Question :34
Identify the dimensions of Business Environment in the following cases:-
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The demonetisation move of the government has resulted in the accumulation of
lakhs of crores of rupees in the banks. Now the banks will give more loans to the
people at lower interest rate. General public can now afford home loans more easily.
Small business will now move towards transaction of business affairs in plastic
money. This will lead to use of internet, new gadets, etc. and reduce dependence on
cash. Report generation of these transactions will be helpful in acting as proof for the
betterment of future business.
Answer:
 Economic environment. Since the demonetisation move results in lowering of

interest rates.
 Technological environment. Due to demonetisation move, there will be
technological advancement in the way business transactions will be done.
Question :35
Mr. Ajay after completing MBA from USA comes to India to start a new business
under the banner Ecom Creations Ltd. He launches a new product in a e-learning for
senior Secondary School students in Commerce stream, which already has n
established market in UK and USA but not in India. His business starts flourishing in
India. Now more Indian companies entered into the market with other subjects also.
Identify and quote the lines from above para which highlight the significance of
understanding business environment.
Answer:
 “Comes to India to start a new business … launches a new product in e-learning

for Senior secondary school students in Commerce stream.”
 It helps in assisting in planning and policy formulation.
 It helps the firm to identify opportunities and get the first mover advantage.
 “His business starts flourishing in India.”
 It helps in improving performance.
 “Now more Indian companies entered into the market with different subjects
also.
 It helps the firm to identify threats and early warnings signals.
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Question :36
The first masters’ is a leading advertising company in its industry. Recently they had a
meeting in which all the reasons which were outside the control of the organisation
were discussed. The organisation wanted to maintain its supremacy in the market.
They decided to break the meeting into two parts. In the first part customers,
competitors, suppliers, etc. were discussed whereas in the second part the political,
economic, social conditions in the country were discussed. It was concluded that
company was doing extremely well in the domestic market and the client base was
expanding. However when the company’s performance in foreign markets was
evaluated it was found that conditions were different in different countries so the
strategies adopted would have to be different. After the meeting the company was
looking forward to making new gains.
Which features of Business Environment have been highlighted in the above case?
Also identify the lines.
Answer:
 The features of Business Environment which have been highlighted are:

o Totality of external forces. Recently they had a meeting in which all the reasons
which were outside the control of the organisation were discussed.
o Specific and general forces. In the first part customers, competitors, suppliers,
etc. were discussed whereas in the second part the political, economic, social
conditions in the country were discussed.
o Relativity. However, when the company’s performance in foreign markets was
evaluated it was found that conditions were different in different countries so
the strategies adopted would have to be different.
Question :37
Advertisements of a protein supplement must inform the potential buyer that the
product if taken beyond a given dose can be harmful to the diabetics.
Which dimension of business environment is highlighted here?
Answer:
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 The dimension of business environment which is highlighted here is
the “Legal” environment as it comes under the legal laws to clearly state the
necessary information as directed by the government.
Question :38
Identify the various dimensions of business environment:

With the election of a new government the Sensex drops by 748 points.
A particular channel refrains from showing the advertisement of a particular product
as it is banned by the government.
A software is in high demand among the industrial buyers as it can connect all the
branches of a company as a single integrated unit.
At the time of holi a large number of manufacturing firms get involved in making
colours which are used in the celebration of this colourful festival.
It is not advisable to open a luxury car showroom in the middle of an economy where
per capita income is very low.
Answer
 The various dimensions of business environment highlighted above are:

o Political environment.
o Legal environment
o Technological environment.
o Social environment.
o Economic environment
Question :39
After winning the election , prime Minister Mr. Narendra Modi launched a Campaign
of sawachh Bharat and invited various celebrities rto be a part ofthis Abhiman. This
spread awareness among the people in society and general , people stared becoming
more careful and aware about the cleanliness around their area . To continue its
impact ,a new and better technology to adopt new methods of treating the garbage
and waste .
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Explain the various dimensions of business environment mentioned in the above para
quoting the lines from the above para .
Answer
 Political Environment :After winning the elections , Prime Minister Mr .

Narendra Modi launched a champion of Swachh Bharat
 Social Environment : people started becoming more careful and aware about
thecleanlinessaround their area .
 Economic Environment : a new service tax for swachh Bharat was also started .
 Technological Environment : import new data better technology to adopt new
methods of tretingthegarbage and waste.

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Chapter 4 Planning
Question :1
Super Fine Rice Ltd. has the largest share of 55% in the market. The company’s
policy is to sell only for cash. In 2015, for the first-time company’s number one
position in the industry has been threatened because other companies started
selling rice on credit* also. But the managers of Super Fine Rice Ltd. continued to
rely on its previously tried and tested successful plans which didn”t work because
the environment is not static. This led to decline in sales of Super Fine Rice Ltd. The
above situation is indicating two limitations of planning which led to decline in its
sales.
Identify three limitations.
Answer:
 The two limitations of planning which led to decline in it sales are:
o Planning does not guarantee success.
o Planning may not work in dynamic environment.
Question :2
Laxmi Chemicals Ltd., a soap manufacturing company, wanted to increase its
market share from 30% to 55% in the long-run. A recent report submitted by the
Research & Development Department of the company had predicted a growing
trend of herbal and organic products. On the basis of this report, the company
decided to diversify into new variety of soaps with natural ingredients having
benefits and fragrances of Jasmine, Rose, Lavender, Mogra, Lemon Grass, Green
Apple, Strawberry etc. The Unique Selling Proposition (USP) was to promote eco-
friendly living in the contemporary life style. The company decided to allocate t 30
crores to achieve the objective.
Identify the type of one of the functions of management mentioned above which
will help the company to acquire dominant position in the market.
Answer:
 Strategy is the type of plan which will help the company to acquire dominant
position in the market.
Question :3
Suhasini, a home science graduate from a reputed college, has recently done a
cookery course. She wished to start her own venture with a goal to provide ‘health
food’ at reasonable prices. She discussed her idea with her teacher (mentor) who
encouraged her. After analysing various options for starting her business venture,
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they short listed the option to sell ready made and ‘ready to make’ vegetable
shakes and sattu milk shakes. Then, they weighed the pros and cons of both the
short listed options.
Name the function of management being discussed above and give any one of its
characteristics.
Also briefly discuss any three limitations of the function discussed in the case.
Answer:
 Planning is the function of management which is being discussed above.
o Planning involves decision-making: Planning essentially involves application of
rational thinking to choose the best alternative among the various available
alternatives in order to achieve the desired goals efficiently and effectively.
o The limitations of planning are described below:
o Planning may not work in a dynamic environment: The business environment is
dyanamic in nature. Every organisation has to constantly adapt itself to
changes in its environment in order to survive and grow.
o However, it is difficult to anticipate all the likely future changes in the
environment with utmost accuracy. Hence, even with planning, everything
cannot be foreseen.
o Planning reduces creativity: The top management undertakes planning of
various activities whereas the other members are expected to merely
implement these plans. This restricts the creativity of the middle level
managers as they are neither allowed to deviate from plans nor are they
permitted to act on their own.
o Planning involves huge costs: The process of planning involves huge cost in
terms of time and money as detailed planning is based on a series of scientific
calculations. Moreover, it may include a number of related costs as well, like
expenses on boardroom meetings, discussions with professional experts and
preliminary investigations to find out the viability of the plan. As a result, the
expenses on planning may turn out to be much more than benefits derived
from it.
Question :4
Two years ago, Madhu completed her degree in food technology. She worked for
some time in a company that manufactured chutneys, pickles and murabbas. She
was not happy in the company and decided to have her own organic food
processing unit for the same. She set the objectives and the targets and
formulated an action plan to achieve the same.
One of her objectives was to earn 10% profit on the amount invested in the first
year. It was decided that raw materials like fruits, vegetables, spices, etc. will be
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purchased on three months credit from farmers cultivating only organic crops. She
also decided to follow the steps required for marketing of the products through
her own outlets. She appointed Mohan as the Production Manager who decided
the exact manner in which the production activities were to be carried out. Mohan
also prepared a statement showing the number of workers that will be required in
the factory throughout the year. Madhu informed Mohan about her area wise
sales target for different products for the forthcoming quarter. While working on
the production table, a penalty of? 100 per day for not wearing caps, gloves and
apron was announced.
Quoting lines from the above paragraph, identify and explain the different types of
plans discussed.
Answer:
 The different types of plans discussed above are listed below:
o Objectives: Objectives are the end results of the activities that-an organisation
seeks to achieve through its existence. All other activities within the
organisation are directed towards achieving these objectives.
“One of her objectives was to earn 10% profit on the amount invested in the
first year.”
o Policy: A policy is a set of general guidelines that helps in managerial decision
making and action.
“It was decided that the raw materials like fruits, vegetables, spices, etc. will be
purchased on three months credit from farmers cultivating only organic crops.”
o Procedure: A procedure contains a series of specific steps to be performed in a
chronological order to carry out the routine activities.
“She also decided to follow the steps required for marketing of the products
through her own outlets.”
“The exact manner in which the production activities are to be carried out.”
o Rule: A rule is a specific statement relating to the general norms in terms of
Do’s and Dont’s that guide the behaviour of people. It commands strict
obedience, and a penalty is likely to be imposed on its violation.
“While working on the production table, a penalty of? 100 per day for not
wearing caps, gloves and aprons was announced.”
o Budget: A budget refers to a financial plan that is expressed in numerical terms.
“Mohan also prepared a statement showing the number of workers different
products for the forthcoming quater.”
Question :5
Two years ago, Mayank obtained a degree in food technology. For some time, he
worked in a company that manufactured bread and biscuits. He was not happy in
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the company and decided to have his own bread and biscuits manufacturing unit.
For this, he decided the objectives and the targets, and formulated an action plan
to achieve the same.
One of his objectives was to earn 50% profits on the amount invested in the first
year. It was decided that raw materials like flour, sugar, salt, etc. will be purchased
on two months credit. He also decided to follow the steps required for marketing
the products through his own outlets. He appointed Harsh as the Production
Manager who decided the exact manner in which the production activities were to
be carried out. Harsh also prepared a statement showing the requirement of
workers in the factory throughout the year. Mayank informed Harsh about his are
a wise sales target for different products, for the forthcoming quarter. While
working on the production table, a penalty of ?150 per day was announced for not
wearing the helmet, gloves and apron by the workers.
Quoting lines from the above paragraph, identify and explain the different types of
plans discussed.
Answer:
 The different types of plans discussed above are listed below:
o Objectives: Objectives are the end results of the activities that an organisation
“One of her objectives was to earn 50% profit on the amount invested in the
first year.”
o Policy: A policy is a set of general guidelines that help in managerial decision
making and action.
“It was decided that the raw materials like flour, wheat, sugar, etc. will be
purchased on two months credit.”
o Method: A method refers to the prescribed ways or manner in which a task has
to be performed considering the objective.
“..decided the exact manner in which production activities were to be carried
out.”
“He also decided to follow the steps required for marketing of the products
through his own outlets.”
Do’s and Dont’s that guide the behaviour of people. It commands strict
obedience and a penalty is likely to be imposed on its violation.
“While working on the production table, a penalty of Rs. 150 per day was
announced for not wearing helmets, gloves and aprons by the workers.”
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Question :6
Rahul, a worker, is given a target of assembling two computers per day. Due to his
habit of doing things differently, an idea struck him which would not only reduce
the assembling time of computers but would also reduce the cost of production of
the computers. Instead of appreciating him, Rahul’s supervisor ordered him to
complete the work as per the methods and techniques decided earlier as nothing
could be changed at that stage. The above paragraph describes one of the
limitations of the planning function of management. Name and explain that
limitation.
Answer:
 The limitation of the planning function of management described in the above
paragraph is that ‘planning reduces creativity.’ The top management
undertakes planning of various policies and procedures whereas the other
members are expected to merely implement these plans. This restricts the
creativity of the middle level managers as they are neither allowed to deviate
from plans, nor permitted to act on their own.
Question :7
Josh Ltd. is a one of the largest two-wheeler manufacturer in India. It has a market
share of about 42% in the two-wheeler category. The company had witnessed
almost a 35% drop in the booking as the currency crunch was prompting people to
withhold new purchases due to demonetisation. Therefore, the production
manager of the company had decided to align production to factor in slower sales
in the market.
Identify and explain the function of management being discussed in the above
lines.
Which limitations of the function of management as identified in part (a) of the
question was the production manager trying to overcome due to demonetisation?
Answer:
 Planning is the function of management which is being discussed in the above
lines.
 Planning is deciding in advance what to do, how to do, when to do and who
has to do it. Thus, it involves setting objectives and developing an appropriate
course of action to achieve these objectives.
 The production manager is trying to overcome the following limitations of
planning:
o Rigidity
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o Planning may not work in dynamic environment
Question :8
The term demonetisation has become a household name since the government
pulled the old Rs. 500 and Rs. 1,000 notes out of circulation in November 2016.
Prior to the year 2016, the Indian government had demonetised bank notes on two
prior occasions—once in the year 1946 and then again in the year 1978. In both
cases, the purpose was to combat tax evasion by ‘black money’. Identify the types
of one of the functions of management being discussed in the above lines.
Answer:
 Objective and Strategy
Question :9
The arrangement to demonetise the ? 500 and ?1000 bank notes began six to ten
months prior to the public announcement and was kept highly confidential. The
cabinet was informed about the demonetisation on 8th November 2016 in a
meeting called by the Prime Minister of India, Narendra Modi. This was followed
by Modi’s public announcement about the demonetisation in a televised address
where he announced that currency notes with the denomination of ? 500 and ?
1000 would cease to be the legal tender from 9th of November 2016. The most
interesting thing regarding the demonetisation is that people were devising
various unique ways for transforming their black money in to white one by
depositing money in the accounts of their poor relatives and friends, converting
black money in to gold, paying a few months salaries in advance and so on.
Identify and explain the types of plans being discussed in the above lines with
regard to demonetisation.
Answer:
 The various types of plans being discussed in the above lines with regard to
demonetisation are detailed below:
o Procedure: It is a series of chronological steps which are performed to do
a particular activity.
o Rule: A rule is a specific statement relating to the general norms in terms
of Do’s and Don’ts that guide the behaviour of people.
Question :10
Flipkart is an e-commerce company founded in the year 2007 by Sachin Bansal and
Binny Bansal. The company is registered in Singapore, but has its headquarters in
Bangaluru, India. The company seeks to increase traffic (more clicks on their
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products) and boost sales and revenue through integration of Mobile Apps,
Display, Pay Per Click and Search Engine Optimization. In order to dispel the fear of
people related to shopping online, Flipkart was the first company to implement the
popular ‘Cash on Delivery’ facility. All the products sold by the company under a
particular category may have different return/replacement period. Flipkart allows
multiple payment options such as cash on delivery, credit or debit card
transactions, net banking, e-gift voucher and card swipe on delivery. The company
operates both ways when an order is received. The products for which it holds
inventory are dispatched by it directly. For the products they do not store in
inventory, they just send the order received by them to the supplier who ships it.
The company plans to spend about ? 75 crores on e-Commerce advertising in the
year 2016. Flipkart reserves the right to terminate your membership and/or refuse
to provide you with access to the website if it is brought to Flipkart’s notice or if it
is discovered that you are under the age of 18 years. This is because as per the
Indian Contract Act, 1872, the minors, un-discharged insolvents, etc. are not
eligible to use the website.
In context of the above case, identify and explain the different types of plans being
used by Flipkart by quoting lines from the paragraph.
Answer:
 The different types of plans being used by Flipkart are listed below:
o Objectives: Objectives are the end results of the activities that an organisation
“The company seeks to increase traffic (more clicks on their products) and
boost sales and revenue through integration of Mobile Apps, Display, Pay Per
Click and Search Engine Optimization.”
o Strategy: A strategy is a comprehensive plan for achieving the objectives of the
organisation. This comprehensive plan involves:
a) determining long term objectives
b) adopting a particular course of action
c) allocating resources necessary to achieve the objective.
“In order to dispel the fear of people related to shopping online, Flipkart was
the first company to implement the popular ‘Cash On Delivery’ facility.”
o Policy: A policy is a siet of general guidelines that help in managerial decision
making and action.
“All the products sold by the company under a particular category may have
different return/replacement period.”
o Method: A method refers to the prescribed ways or manner in which a task has
to be performed considering the objective.
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“Flipkart allows multiple payment options such as cash on delivery, credit or
debit card transactions, net banking, e-gift voucher and card swipe on
delivery.”
“The company operates both ways when an order is received. The products for
which it holds inventory are dispatched by it directly
For the products they do not store in inventory, they just send the order
received by them to the supplier who ships it.”
o Budget: A budget refers to a financial plan that is expressed in -numerical
terms.
“The company plans to spend about ? 75 crores on e-commerce advertising in
the year 2016.”
Do’s and Don’ts that guide the behaviour of people. It commands strict
obedience and a penalty is likely to be imposed on its violation.
“Flipkart reserves the right to terminate your membership and/or refuse to
provide you with access to the Website if it is brought to Flipkart’s notice or if it
is discovered that you are under the age of 18 years. This is because as per the
Indian Contract Act, 1872, the minors, un-discharged insolvents etc. are not
eligible to use the Website.
Question :11
Rajender has been running a successful business of manufacturing traditional
wedding wear for women including sarees and lehengas. His friend Surinder who is
engaged in the business of providing web designing solutions to his clients,
suggests him to explore the option of selling his products online. Rajender agrees
to his suggestion and decides to venture into online business, keeping in view the
various e-commerce regulations in order to avoid imposition of any penalty. In
order to facilitate the sale of his products, Rajender decides to offer multiple
payment options such as cash on delivery, credit or debit card transactions, net
banking to the buyers etc.
Identify the two different types of plans mentioned in the above paragraph that
relate to the online portal that Rajinder intends to startby quoting lines from the
paragraph.
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Answer:
 Rule and Method are the two different types of plans that relate to the online
portal that Rajender intends to start.
o Rule: “Rajender agrees to his suggestion and decides to venture into online
business keeping in view the various e-commerce regulations in order to avoid
imposition of any penalty.”
o Method: “However, he decides to offer multiple payment options such as cash
on delivery, credit or debit card transactions, net banking to the buyers etc.”
Question :12
Wazir Ahmed joins ‘Ashiyana Ltd.’ a company dealing in real estate, as a human
resource manager. Through a series of interactions with his team during lunch
breaks, he comes to know that quite a few managers at middle and senior levels
have recently left the organisation as their promotions were overdue. Therefore, in
order to reinstate the confidence of the staff, he lays out a clear cut plan consisting
of a set of general guidelines for both time bound and performance related
appraisals of the mangers at all levels. Moreover, he develops standardized
processes containing a series of steps specified in a chronological order for its
implementation.
Identify the two different types of plans that Wazir Ahmed proposes to implement
in order to reinstate the confidence of the staff by quoting lines from the
Answer:
 Policy and Procedure are the two different types of plans that Wazir Ahmed
proposes to implement in order to reinstate the confidence of the staff.
o Policy: “… he lays out a clear cut plan consisting of a set of general guidelines
for both time bound and performance related appraisals of the mangers at all
levels.”
o Procedure: “Moreover, he develops standardized processes containing a series
of steps specified in a chronological order for its implementation.”
Question :13
Apna Ghar a company dealing in consumer durables, plans to increase the sale of
its products by 25% around Diwali this year. Moreover, in order to cash on the
implementation of the seventh pay commission by that time, which is likely to
raise the income of 47 lakh serving employees of the Central government and 52
lakh pensioners, the company has created 30 advertisement films which will be
aired across 85 national and regional channels until Diwali.
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Identify the two different types of plans that ‘Apna Ghar’ proposes to implement
by quoting lines from the paragraph.
Answer:
 Objective and Strategy are the two different types of plans that ‘Apna Ghar’
proposes to implement.
o Objective: “Apna Ghar’, a company dealing in consumer durables, plans to
increase the sale of its products by 25% around Diwali this year.”
o Strategy: “Moreover, in order to cash on the implementation of the seventh
pay commission by that time which is likely to raise the income of 47 lakh
serving employees of the Central government and 52 lakh pensioners, the
company has created 30 advertisement films which will be aired across 85
national and regional channels until Diwali.”
Question :14
After completing a diploma in Bakery and Patisserie, Payal sets up a small outlet at
Goa Airport to provide a healthy food option to the travellers. To begin with, she
has decided to sell five types of patties, three types of pizzas and low sugar muffins
in four flavours. Thus, by deciding in advance what to do and how to do, she is able
to reduce the risk of uncertainty and avoid overlapping and wasteful activities. But
sometimes her planning does not work due to some unavoidable circumstances
like cancellation of flights due to bad weather conditions, government alert etc.
which adversely affects her clientele.
Identify and explain the points highlighting the importance of planning mentioned
in the above paragraph.
Describe briefly the limitation of planning which adversely affects Payal’s business
Answer:
 The points highlighting the importance of planning mentioned in the above
paragraph are described below:
o Reduces the risk of uncertainty: Planning relates to deciding in advance about
the tasks to be performed in future. This enables a manager to anticipate
changes and devise the ways to deal with changes and uncertain events
effectively.
o Avoiding overlapping and wasteful activities: Planning ensures clarity in
thought and action and serves as the basis of coordinating the activities and
efforts of different individuals and departments. Therefore, by curtailing
useless and redundant activities, it helps in the smooth working of the
organisation’s work without interruptions. Moreover, it makes detection of
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inefficiencies easier so that timely corrective measures may be taken to avoid
them in future.
 The limitation of planning which adversely affects Payal’s business is:
o Planning may not work in a dynamic environment: The business environment is
dynamic in nature. Every organisation has to constantly adapt itself to changes
in its environment in order to survive and grow. However, it difficult to
anticipate all the likely future changes in the environment with utmost
accuracy. Hence, even with planning, everything cannot be foreseen.
Question :15
Agile Ltd.’ is a well-known automobile manufacturing company in India. The
company plans to increase the sale of its sedan cars by 20% in the next quarter. In
order to achieve the desired target, the marketing team of the company considers
the impact of policy of the government towards diesel vehicles and the level of
competition in this segment of cars. They explore the various available options like
offering more discount to dealers and customers, providing more customer
friendly finance options, lucky draws on test drives, increasing advertising, offering
more of free accessories on the purchase of the car, etc. A thorough analysis of the
various available options is done keeping in view the relative viability of each
option. The company decides to pursue the option of offering more discount to
dealers and customers in order to boost the sale of sedan cars. In order to
implement the plan, they determine the various discount packages and
communicate the same to their product dealers. To make the prospective
consumers aware about the new available benefits, advertisements are made
through various sources of print and electronic media. The market analysts of the
company keep a close watch on the revenue from the sedan cars to study the
effect of new initiatives by the company to promote its sales.
Name the function of management described in the above paragraph.
Identify and explain the various steps involved in process the function of
management as identified in part (a) by quoting lines from the paragraph.
Answer:
 Planning is the function of management which is being described in the above
paragraph.
 The various steps involved in the planning process are explained below:
o Setting objectives: The planning process is initiated by setting the objectives in
clear, specific and measurable terms. The objectives may be set for the
organization as a whole and for each department or unit within the
organization.
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“The company plans to increase the sale of its sedan cars by 20% in next
quarter.”
o Developing Premises: Planning process is carried out keeping in view the
assumptions related to the future, which is uncertain. These assumptions are
called premises and may relate to government policy, interest rate, inflation,
etc. Accurate forecasts are therefore essential for successful planning.
o “In order to achieve the desired target, the marketing team of the company
considers the impact of policy of the government towards diesel vehicles and
level of competition in this segment of cars.”
o Identifying alternative courses of action: The next step in the planning process
involves identification of the various ways in which the goals can be achieved.
“They explore the various available options like offering more discount to
dealers and customers, providing more customer friendly finance options,
lucky draws on test drives, increasing advertising, offering more of free
accessories on the purchase of the car, etc.”
o Evaluating alternative courses: In order to select the best option, the relative
positive and negative aspects of each alternative should be evaluated in the
light of their feasibility and consequences.
“A thorough analysis of the various available options is done keeping in view
the relative viability of each option.”
o Selecting an alternative: The best plan is adopted to achieve the desired goals.
Sometimes, a combination of plans may be selected instead of one best course
of action.
“The company decides to pursue the option of offering more discount to
dealers and customers in order to boost the sale of sedan cars.”
o Implement the plan: This step is concerned with putting plans into action.
“In order to implement the plan, they determine the various discount packages
and communicate the same to their product dealers. To make the prospective
consumers aware about the new available benefits, advertisements are made
through various sources of print and electronic media.”
o Follow up action: Monitoring of plans is equally important to ensure that
objectives are achieved efficiently and effectively.
“The market analysts of the company keep a close watch on the revenue from
the sedan cars to study the effect of new initiatives by the company to
promote its sales.”
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Question :16
Arush joins as a sales manager of a company dealing in naturotherapy products.
Being proficient in his work, he knew that without good planning he will not be
able to organise, direct, control or perform any of the other managerial functions
efficiently and effectively. Only on the basis of sales forecasting, he would assist in
the preparation of the annual plans for its production and sales. Besides, he will
have to prepare sales plans regularly on weekly, monthly, quarterly and half yearly
basis. While preparing the sales forecasts, he undertakes intellectual thinking
involving foresight, visualization and issued judgement rather than wishful thinking
or guess work. Most importantly, all these planning activities will be meaningful
only if they will coincide with the purpose fob which the business is being carried
out.
In context of the above case, identify the various features of planning highlighted
in the above paragraph by quoting lines from it.
Answer:
 The features of planning highlighted in the above paragraph are explained
below:
o Planning is a primary function: Planning precedes all the functions of
management i.e. organizing, staffing, directing and controlling. This refers to
primacy of planning. Planning provides the basis of all other functions.
“… without good planning he will not be able to organise, direct, control or
perform any of the other managerial functions efficiently and effectively. “
o Planning is futuristic: Planning is called a forward looking function as it enables
an organization to meet future events effectively.
“Only on the basis of sales forecasting, he would assist in the preparation of
the annual plans for its production and sales.”
o Planning is continuous: Plans need to be continuously made, implemented and
followed by another plan and so on till an organization exists
“Besides, he will have to prepare sales plans regularly on weekly, monthly,
quarterly and half yearly basis.”
o Planning is a mental exercise: Planning is done on the basis of rational thinking
involving foresight, visualization and issued judgement rather than wishful
thinking or guess work.
“While preparing the sales forecasts, he undertakes intellectual thinking
involving foresight, visualisation and issued judgement rather than wishful
thinking or guess work.”
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o Planning focuses on achieving objectives: Planning is a purposeful activity as it
contributes to the achievement of predetermined goals of the organisation
both efficiently and effectively.
“Most importantly, all these planning activities will be meaningful only if they
will coincide with the purpose for which the business is being carried out.”
Question :17
Holistic Education Public School in Bahadurgarh decides to implement the literacy
programme of the government in the school. It is decided that within the year, the
forty five support staff employees of the school will be made literate by the school
counsellors and social workers. In order to enhance the learning process, the
school decides to use audio-visual aids. To start the programme, the school has to
first procure the literacy books from State Resource Centre at Jamia. Besides the
curriculum, each literacy book contains a series of nine tests which the volunteers
have to get completed by the learners during the programme. Moreover, by
implementing the plan of ‘each one teach one’, each student of the school from
classes fifth to tenth will be encouraged to make one person literate. The student
volunteers may select a learner by adopting any one of the two ways; either from
the slum areas adopted by the school or on their own within the vicinity of their
residence. As per the norms of the Delhi Government, it is mandatory for the
volunteers to send back the filled copy of only the ninth test paper in the series to
the authorities as a conclusive proof of the completion of the course, else the
certificate of commendation will not be awarded to them. Considering the
implementation of the programme to be a part of its corporate social responsibility
initiative, the school has decided to spend around Rs. 50,000 on the distribution of
free stationery items, refreshments of the learners, etc.
Identify the various types of plans being used by Holistic Education Public School in
order to implement the literacy programme in their school by quoting the lines
from the paragraph.
Categorise the various types of plans as identified in part (a) into single use plans
and standing plans.
Answer:
 The various types of plans being used by the school to implement the literacy
programme in the school are:
o Objectives: “It is decided that within the year, all the forty five support staff
employees of the school will be made literate by the school counsellors and
social workers.”
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o Strategy: “In order to enhance the learning process, the school decides to use
audio visual aids.”
o Policy: “Moreover, by implementing the plan of ‘each one teach one,’ each
student of the school from classes fifth to tenth will be encouraged to make
one person literate.”
o Procedure: “To start the programme the school has to first procure the literacy
books from State Resource Centre at Jamia. Besides the curriculum, each
literacy book contains a series of nine tests which the volunteers have to get
completed by the learners during the programme.”
o Method: “The student volunteers may select a learner by adopting any one of
the two ways; either from the slum areas adopted by the school or on their
own within the vicinity of their residence.”
o Rule: “As per the norms of the Delhi Government, it is mandatory for the
volunteers to send back the filled copy of only the ninth test paper in the series
to the authorities as a conclusive proof of the completion of the course, else
the certificate of commendation will not be awarded to them.”
o Budget: “Considering the implementation of the programme to be a part of its
corporate social responsibility initiative, the school has decided to spend
around? 50,000 on the distribution of free stationery items, refreshments of
the learners, etc.”
o Single use plans are the ones that are formulated to deal with new or non-
repetitive situations that may arise in an organisation from time to time. This
includes programmes, budgets and projects.
o Standing plans refer to the types of plans which once formulated may be used
for a long period of time in similar or repetitive situations that may prevail in
an organisation. These include objectives, strategies, policies, procedures
methods and rules.
Question: 18
A shoe manufacturing company wants to become a market leader. For this a
detailed planning is required. The first step taken by the firm is to set targets for
the three months duration for selling maximum number of shoes in the market
which they set as 2,50,000. The team doesn’t want to make any mistake so they
decide to do proper planning. They decide to chalk out alternative plans so that
they can arrive at the best possible plan. However the team is surrounded with
doubts. To remove doubts, it goes for judging the plans to get the most profitable
one. The plan is taken to the whole organisation and the concerned persons.
Ultimately it is put into action. Without much caring for the results the company
starts working on the other project simultaneously.
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Identify the steps in the planning process which have been applied by the
organisation in the above case?
Answer:
 In the above case the steps of planning which are applied are:
o Setting Objectives. The first step taken by the firm is to set targets for the three
months duration for selling maximum number of shoes in the market which
they set as 2,50,000.
o Identifying alternative courses of action. They decide to chalk out alternative
plans so that they can arrive at the best possible plan.
o Evaluating the different courses of action. To remove doubts it goes for
selecting the plan which can be considered as the most profitable.
o Selection of the best plan. The best plan is finalised.
o Implementation of the plan. Ultimately it is put into action
Question :19
A shoe manufacturing company wants to become a market leader. For this a
detailed planning is required. The first step taken by the firm is to set targets for
the three months duration for selling maximum number of shoes in the market
which they set as 2,50,000. The team doesn’t want to make any mistake so they
decide to do proper planning. They decide to chalk out alternative plans so that
they can arrive at the best possible plan. However the team is surrounded with
doubts. To remove doubts it goes for judging the plans to get the most profitable
one. The plan is taken to the whole organisation and the concerned persons.
Ultimately it is put into action. Without much caring for the results the company
starts working on the other project simultaneously.
Identify the steps in the planning process which have been applied by the
organisation in the above case?
Answer:
 In the above case the steps of planning which are applied are:
o Setting Objectives. The first step taken by the firm is to set targets for the three
months duration for selling maximum number of shoes in the market which
they set as 2,50,000.
o Identifying alternative courses of action. They decide to chalk out alternative
plans so that they can arrive at the best possible plan.
o Evaluating the different courses of action. To remove doubts it goes for
selecting the plan which can be considered as the most profitable.
o Selection of the best plan. The best plan is finalised.
o Implementation of the plan. Ultimately it is put into action
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Question :20
Serious Business’ is a balloon manufacturing firm. With the arrival of foreign firms
it is feeling the pressure of improving its business strategy. Because of the firm’s
advance planning it could not suddenly bring changes in its plans as the whole
organisation had started implementing the decided plan. But this year the
organisation wants to ensure success. However, the firm knows that the external
environment is changeable and continues to vary in a fast manner. The
organisation wants to prepare in advance for a better future. It has decided to
allocate a portion of its budget specifically for proper planning as it knows there
are going to be expenses like Expert’s fee, survey charges, etc.
Which limitations of planning have been identified in the above case?
Answer:
 The limitations of planning highlighted in the above case are:
o Planning leads to rigidity. Because of the firm’s advance planning it could not
suddenly bring changes in its plans as the whole organisation had started
implementing the decided plan.
o Planning may not work in a dynamic environment. However, the firm knows
that the external environment is changeable and continues to vary in a fast
manner.
o Planning involves huge costs. It has decided to allocate a portion of its budget
specifically for proper planning as it knows that there are going to be expenses
like Expert’s fee, survey charges, etc.
Question :21
Flows Technology’ deals in bulb manufacturing business. It plans for a successful
year of production and sale this year. It has in advance given targets to all its
departments and employees. The departments and employees are happy about
this. They know that now they won’t have to do unconcerned activities thus leading
to more focused approach resulting in saving of resources. The company is thinking
of starting two new plants in the southern portion of India. For this some concrete
plan has to be made. The main core team of the company has decided to weigh all
the options and then choose the best one. The road might be long but the company
is geared to face all the challenges.
In the above case identify importance of planning highlighted.
Answer:
 The importance of planning indicated in the above case are:
o Planning provides directions. It has in advance given targets to all its
departments and employees.
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o Planning reduces overlapping and wasteful activities. They know that now they
won’t have to do unconcerned activities thus leading to more focused
approach resulting in saving of resources.
o Planning facilitates decision making. The main core team of the company has
decided to weigh all the options and then choose the best one.
Question :22
An established firm has fifty years of experience in shipping industry. The company
time and again proves itself as one of the dominant figures in the market. The plan
for the whole year is given a lot of importance. According to the owner of the
company their plans are the basic structures upon which other important functions
of management rest. It is important that the plans are communicated to the
employees. The top management ensures that the plans are communicated and
implemented at all levels and in all departments. To learn from past mistakes is a
habit of this successful company. They prepare plans for short term as well as long
term where it can be seen that throughout the year the plans are prepared one
after another. Shipping industry needs such dedicated companies. The goals are
specific and the activities to achieve these specific goals are undertaken. The
company has planned a growth of 20% in revenue this year. Let’s see how much it’s
possible for it to achieve it by the end of the year.
In the above case identify the various features of planning highlighted.
Which type of plan is indicated in the above case?
Answer:
 The features of planning highlighted above are:
o Planning is a primary function of management. According to the owner of the
company their plans are the basic structures upon which other important
functions of management rest.
o Planning is pervasive. The top management ensures that the plans are
communicated and implemented at all levels and in all departments.
o Planning is continuous. They prepare plans for short term as well as long term
where it can be seen that throughout the year the plans are prepared one after
the other.
o Planning focuses on achieving objectives. Goals are specific and the activities to
achieve these specific goals are undertaken.
o The type of plan which is indicated in the above case is ‘Objective’. The
Company has planned a growth of 20% in revenue this year. Here the plan is
precise and quantified. When a goal is quantified it becomes an objective.
Question :23
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Sukumar is an energetic middle level manager. He tries to make best plans. For this
he involves foresight and intelligent imagination. Within three years many of his
projects have been very successful. His high success rate is due to his good plans.
He always makes alternative plans and selects the best out of them after
considering relevant aspects. However, he knows it is not necessary that his all
plans will be successful. He knows that sometimes his concern for making very good
plans eats a lot of time and energy. His friend Jyoti suggests him to take suggestions
from others when he makes his plans and also consider plans made by others. Even
after so much painstaking Sukumar knows that his plans can yet fail in the uncertain
business environment. He has recently decided to plan carefully in future.
Which features of Planning have been highlighted in the above case?
Which limitations of Planning have been highlighted in the above case?
Answer:
 The features of Planning which have been highlighted in the above case are:
o Planning is a mental exercise. For this he involves foresight and intelligent
imagination.
o Planning involves decision making. He always makes alternative plans and
selects the best out of them after considering relevant aspects.
o The limitations of Planning which have been highlighted are:
o Planning is a time consuming process. He knows that sometimes his concern
for making very good plans eats a lot time and energy.
o Planning does not guarantee success. Even after so much painstaking Sukumar
knows that his plans can yet fail in the uncertain business environment.
Question :24
Identify the types of plans:
1. Ramesh is a senior middle level manager. He is busy in allocating resources to
his staff, he has also finalised the objectives and decided the course of action
to be followed. He is expecting energy in his staff for the whole season but he
will have to be caucious.
2. Suresh is giving a speech to the workers of his factory. He is the owner of a
toy manufacturing factory and has 123 workers. He tells them that this year’s
target of production is 7.5 lakh toys.
3. On the wall of ‘Health is Wealth’ hospital a board is hanging. On this board. It
is written ‘We care for the health of senior citizens as our topmost priority’.
This hospital is known for treating people aged more than 60 years.
4. Rakesh calls his new subordinates for a meeting. He is a top level manager.
He arranges for a power point presentation to train his subordinates who are
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all middle level managers. He tells them the way of doing task of treating
suppliers through a new software system to be installed within next 30 days.
5. Dinesh takes a meeting and guides his employees in a type of plan which is
chronological in nature and is situation specific. It is a collection of various
methods in a step wise sequence.
6. Amit has given a detailed statement of expected results in numerical terms.
This plan is conveyed to the subordinates by him in a special meeting.
Answer:
 The different types of plans are:
1) Strategy
2) Objective
3) Policy
4) Method
5) Procedure
6) Budget
Question :25
In an annual general meeting a company sets its targets for the year. The
manufacturing department has decided to manufacture 2.5 million units of the
product and has decided to monitor the performance so as to control it accordingly.
The survey done by the company has shown a number of cities in the north which
are showing increased demand for the product. The company in its research during
the last three months generated various options and decided to follow the best
one. The HR team is also concerned about its output. The HR head revealed that
there can be shortage of MBA pass outs which can reduce the quality of manpower
in the near future so it has decided to arrange HR workshops in different colleges to
get the best candidates. The board meeting ends on a positive note.
In the above case identify the importance of planning and the concerned lines.
Answer:
 The importance of planning highlighted above:
o Planning establishes standards for controlling. The manufacturing department
has decided to manufacture 2.5 million units of the product and has decided to
monitor the performance so as to control it accordingly.
o Planning facilitates decision making. The Company in its research during the
last three months generated various options and decided to follow the best
one.
o Planning reduces the risk of uncertainty. The HR head revealed that there can
be shortage of MBA pass outs which can reduce the quality of manpower in the
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near future so it has decided to arrange HR workshops in different colleges to
get the best candidates.
Question :26
Dhulai’ is a washing machine manufacturing company. The company decides to
enter into music system manufacturing industry. The company has a committed top
management. It knows that there are various challenges in the market where its
decisions regarding the new industry might fail. Still the top management doesn’t
want to waste a lot of resources on its plans. It knows that sometimes plans take
more time in making than getting implemented. However, the company wants to
proceed with a positive approach. It has decided to study all the aspects of its
competitors, to set all its objectives and to allocate the required resources. The
company did well in its previous business. At that time they took planning very
seriously as they knew everything the company would do had to be based on
concrete plans. The company will start its operations from next month.
Which function of management has been discussed in the above case? Which
limitations of planning have been highlighted in the above case? Which type of plan
is indicated in the above case? Which feature of planning is highlighted above?
Answer:
 The function of management which is discussed in the above case is ‘Planning’.
The company decides to enter into music system manufacturing industry.
 The various limitations of planning highlighted above are:
o Planning does not guarantee success. It knows there are various challenges in
the market where its decisions regarding the new industry might fail.
o Planning involves huge costs. Still the top management doesn’t want to waste
a lot of resources on its plans.
o Planning is a time-consuming process. It knows that sometimes plans take
more time in making than getting implemented.
o The type of plan indicate above is ‘Strategy’. It has decided to study all the
aspects of its competitors, to set all its objectives and to allocate the required
resources.
o The feature of planning highlighted above is Planning is a primary function of
management. At that time, they took planning very seriously as they knew
everything the company would do had to be based on concrete plans.
Question :27
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Dheeraj is a very hard working manager. After working for the implementation of
his well chalked out plan he, from the start of July, decides to see in what ways and
up to what accuracy has his plan been implemented.
Which step of the planning process will be involved by Dheeraj from the starting of
July?
Answer:
 The step of the planning process involved by Dheeraj will be the last step:
‘Follow through’
Question :28
Suraj is the CEO of a company. He in accordance with the other board members
decides to formulate a general statement which will be guiding the thinking
of the employees. He further goes on to formulate many such statements in the
next six months. These statements could be divided into two categories.
Which type of plan is indicated above? What are the two types of this plan? Also
give one example of this plan.
Answer:
 Suraj is the CEO of a company. He in accordance with the other board
members decides to formulate a general statement which will be guiding the
thinking of the employees. He further goes on to formulate many such
statements in the next six months. These statements could be divided into two
categories.
 The type of plan highlighted in the above case is ‘Policy’ (He decides to
formulate a general statement which will be guiding the thinking of the
employees).
 The two types of policies are major policies and minor policies.
One example of Policy is ‘Recruitment Policy’
Question :29
A specific statement was given by an HR head. This statement had no scope for any
flexibility. It was the simplest type of plan. Identify the type of plan. Give one more
characteristic of this plan. Which plan is the widest type of plan?
Answer:
 The type of plan is ‘Rule’.
 One more characteristic of this plan. It tells which action must or must not be
taken.
 The widest type of plan is ‘Programme’.
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Question :30
Ramesh is a supervisor in a company. He works at the lower level of management.
He teaches ‘on the job training’ the ways in which a task is to be done by the
workers at the shop floor level. He meets his boss on ce a week day and gives him a
numerical statement quantifying the numbers needed in various activities at the
shop floor for next 6 months. The boss approves his requirements and gives him a
job to set targets in figures about the next plan he thinks is good for the
manufacturing unit. Ramesh’s dedication is noticed by all.
In the above case which types of plans have been highlighted? 2
Which step of planning process is highlighted in the above case?
Answer:
 The types of plans which have been highlighted above are:
o Method. He teaches ‘on the job training’ the ways in which a task has to be
done by the workers at the shop level.
o Budget. He gives him a numerical statement quantifying the amount needed in
various activities at the shop floor.
 The step of planning process highlighted in the above case is ‘Setting
Objectives’. The boss approves his requirements and gives him a job to set
targets in figures about the next plan he thinks is good for the manufacturing
unit.
Question :31
Rajesh is at the real point of decision making in the course of his planning. He has
arrived at this point after identifying various alternative courses of action. After
identification he was thoroughly involved in the evaluation of each of these
alternatives. He later got involved into making several permutations and
combinations of these alternatives to arrive at this point.
Through which stage of the planning process is Rajesh going? Also give the next two
steps of planning process.
Answer:
 Rajesh is at the real point of decision making in the course of his planning. He
has arrived at this point after identifying various alternative courses of action.
After identification he was thoroughly involved in the evaluation of each of
these alternatives. He later got involved into making several permutations and
combinations of these alternatives to arrive at this point.
 The stage through which Rajesh is going is ‘Selecting an alternative’. The real
point of decision making is selecting an alternative.
 The next two steps in the process of planning are ‘Implementing the
plan’ and ‘Follow through’.
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Question :32
Naman is a very intelligent planner. He knows the market pretty well. For last 15
years he has been leading several successful projects for his company. Company
gives him responsibility to start a new project in S. America. With his experience he
makes assumptions about all the possible future scenarios.
Which step of the planning process is the above paragraph related to?
What is the other term used for assumptions in planning process?
What is the base material for developing premises?
Answer:
 The step of the planning process referred to here is ‘Developing
Premises’ (second step of the planning process).
 The other term used for assumptions in planning process is ‘Premises’.
 The base material for developing premises is forecasts, existing plans or any
past information.
Question :33
High Voltage’ – a company which manufactures microwaves is known for its
flawless planning. However the top management of the company accepts that some
of its plans have failed in the past as the outside business environment is
unpredictable and dynamic. The company invests a huge portion of its revenue on
planning related issues. Recently in a newspaper the company was blamed for
preventing its employees from doing new things due to the
plans which are decided by the top management. Rajesh a middle level manager in
the company in a seminar said that the planning aspect of a company should be
dealt cautiously. There should be specific goals and activities to reach these goals
should also be properly executed. Company has many serious competitors in the
market. Even they unanimously agree that without planning no other function of
management can exist and it’s the basic platform on which the whole structure of
management is laid. When it comes to follow up of plans it becomes very important
to know the standards. The success of a plan can only be checked when it is known
how much of the set target has been met because it is at the stage of planning
these targets are set. It’s not about the past. It’s for the coming time and challenges
that a company formulates a plan. Rajesh knows this well. He uses his intelligent
imagination and foresight while formulating the plans.
Which limitations of planning have been highlighted in the above case?
Which features of planning have been indicated in the above paragraph?
Which importance of planning do you find sighted in the above case?
Answer:
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 The limitations of planning highlighted in the above case are:
o Planning may not work in a dynamic environment. (However the top
management of the company accepts that some of its plans have failed in the
past as the outside business environment is unpredictable and dynamic).
o Planning reduces creativity. (Recently in a newspaper the company was blamed
for . preventing its employees from doing new things due to the plans which
are decided by the top management).
 The features of planning indicated in the above case are:
o Planning helps in achieving objectives. There should be specific goals and
activities to reach these goals should also be properly executed.
o Planning is the primary function of management. Even they unanimously agree
that without planning no other function of management can exist and it’s the
basic platform on which the whole structure of management is laid.
o Planning is a mental exercise. He uses his intelligent imagination and foresight
while formulating his plans.
 The importance of planning highlighted in the above paragraph:
o Planning sets standards for controlling. The success of a plan can only be
checked when it is known how much of the set target has been met because it
is at this stage of planning such targets are set.
Question :34
It is deciding in advance what to do and how to do? It is one of the basic managerial
functions. It requires that before doing something, the manager must formulate an
idea of how to work on a particular task. This function is closely connected with
creativity and innovation. It seeks to bridge the gap between where we are and
where we want to go and is performed at all levels of management.
In spite of this the function of management referred above has a number of
limitations. Explain any two such limitations.
Answer:
 Planning function of management has been referred above.
 Two limitations of the planning function of management are:
o Rigidity. One of the limitations of planning is rigidity. The existence of,a plan
puts the managerial activities in a rigid framework. Programmes are carried out
according to the plan and deviations are considered to be highly undesirable.
o Reduces creativity. Planning involves deciding in advance what is to be done,
how is it to be done, when is it to be done and by whom is it to be done. There
is very little scope for deviating from the plans. This blind conformity with the
pre-determined guidelines discourages individual initiative and freedom.
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Question :35
A company is manufacturing garments. The manager wants to increase profits by
purchasing new high-speed machines or increasing the sale price or using waste
material in manufacturing stuffed toys.
He decided that using waste material to increase the profits is the best solution for
him.
Identify the concepts of management involved
Mention the steps involved in the above process by quoting the lines from the
question.
To complete the process of the concept identified in (a) what two next steps does
the manager have to take? Explain.
Answer
 The concept of management involved in Planninig.
 Steps involved are :
o Setting objectives :increasing profits
o Developing planning premises : making certain assumption about future .
o Identifying alternative courses of action :
o purchasing new high speed machines
o Incresing the sale price :Using waste material in manufacturing stuffed toys
o Evaluating alternatives : positive and negative aspects of these alternatives are
evaluated .
o Selecting an alternative : using waste material in manufacturing stuffed toys .
o Further steps to complete the process of planning :
o Implementing the plan
o Follow-up action
Question : 36
Zeeshan Ltd. Is a company which manufactures leater bags . The CEO of the
company wants to increase their sales and earn more profits . They consulted with a
management consultant who suggested the top management of the company to
workhardin thinking about future in making business predictions and achieves the
targets since the business environment keeps on changing whether in terms of
technological improvement, shifts in consumer preferencesor entry of new
competitors in the market .
Identify and state the concept of management discussed in the above Para.
State the characteristics features of businesss environment highlighted in the above
Para.
Answer
 Planning
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 It involve setting objectives and developing appropriate course of actionto
achieve these objectives .
o Dreams can be converted into reality only if business managers think in
advance on what to do and how to do it .
o Business environment is dynamic as it keeps on changing .
Question : 37
Which types of plan is highlighted in each of the following statements :
1. Alcohol is not permitted within the factory premises .
2. Company follows the practice of hiring employees who are above 25 years of
age.
3. Any employees found logging to any social networking site in the office will
be subject to strict disciplinary action.
4. 10%jobs reserved for womens in every department .
5. Library will issue the books for 7 days .
6. Girls will be given a rebate of 5% in cut off for admission in the college .
Answer
1) Rule
2) Policy
3) Rule
4) Policy
5) Policy
6) Policy
Question : 38
ABC Ltd. has a plan of increasing profits by 20 %. It has devoted a lot of time and
money to this plan . But the competition starts increasing , so it could not change its
plan to beat its co petitions because huge amount of money had already been
devoted to the pre decided plan . It caused losses to the company . Explain any two
limitations of planning highlighted in the above case . Also quote the lines from it.
Answer
 ABC Ltd . has devoted a lot of time and money to its plan . Planning is a time
consuming process . It also involves huge costs .
 The competitions starts increasing, so it could not change its plan to beat
competitions because huge amount of money had already been devoted to
the pre -decided plan . Planning leads to rigidity .
Question :39
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The management of ABC Ltd. set up the target o1f selling 10,000 units per week and
made all their plans based on this target . But due to change in technology adapted
by competitors which reduced their cost . The ABC Ltd could not achie e their target
. Identify the limitations of planning discussed in the above Para.
Answer
 Planning may not work in a dynamic environment.
Question : 40
Having transformed 2500 Kirana stores across eight cities in to virtual super market,
the startup Quick Bizz further decided in advance , to allocate with 15000-20000
store owners in top 30 cities of the country by the end of the year . The company
has set its eye on digitizing over 100000 Kirana stores next 18-24 months.
Identify and explainthe steps in the process of one of the functions of management
discussed above.
Answer
 Following is the steps in process of planning
o Setting objectives: The first and foremost step is setting objectives. Objectives
may be set for the entire organisational eadpchdepartmen5 or unit within the
organization objectives or goals specify what the organization wants to achieve
o Objectives should be stated clearly. Management must contributes ideas and
participate in the objective setting process. If the end result is clear it becomes
easier to work towards the goal.
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Chapter 5 Organizing
Question:1
Aman Chadha started ‘Bulls Eye’ a company for providing cyber security solutions
to businesses. Its objective is to prevent, detect and respond to cyber-attacks and
protect critical data. He was a hardworking software engineer and an expert in
cyber security. His reputation grew by leaps and bounds as he was not only a
person of integrity but also did his work with utmost honesty and sincerity. The
business started growing day by day.
He was delighted when he was offered a big project by the Ministry of Defence.
While working on the project, he found that the volume of work made it
impractical for him to handle all the work by himself. He decided to expand the
team. The company maintained a close liaison with a local engineering college.
During a campus placement, Ishan and Vrinda were appointed to work for the new
project.He found the new employees capable, enthusiastic and trustworthy. Aman
Chadha was thus, able to focus on objectives and with the help of Ishan and
Vrinda, the project was completed on time. Not only this Aman Chadha was also
able to extend his area of operations. On the other hand Ishan and Vrinda also got
opportunities to develop and exercise initiative.
Identify and briefly explain the concept used by Aman Chadha in the above case
which helped him in focusing on objectives.
Also, state any four points of importance of the concept identified in (i) above.
Answer:
 Delegation of authority is the concept used by Aman Chadha in the above case
 Delegation of authority is the process of granting of authority to the
subordinates to operate within prescribed limits.
 The four points of importance of delegation of authority are described below:
o Effective management: It helps the managers to function more efficiently as
they get more time to concentrate on important matters. Freedom from doing
routine work provides them with opportunities to excel in new areas.
o Employee development: By empowering the employees, they are given more
opportunities to utilise their talent, and this may help them to become better
leaders and decision makers in future.
o Motivation of employees: Delegation also has psychological benefits as helps in
building the self-esteem of an employee and improves his confidence and work
performance. When a superior entrusts a subordinate with a task, it is not
merely the sharing of work but involves trust on the superior’s part and
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commitment on the part of the subordinate. Thus, delegation may give rise to
latent abilities in the subordinates.
o Facilitation of growth: With the increase in the competence of the employees,
an organisation tends to gain in many ways. The growth and expansion of the
firm becomes easy as the capable workforce is ready to take greater
responsibilities.
Question: 2
Ramdas, aged 49 is working in an aviation company. He is the senior most
employee in his division. He is even senior to the division manager, Kanaputti.
Ramdas is considered one of the most committed, capable and hard-working
employees. As a result of his abilities and seniority, he generally received the work
assignments of his choice. Although there was no formal designation of various
„special’ projects assigned to Ramdas, he handled them as a matter of routine. A
problem developed when an able and intelligent person Nagarjuna, aged 33, was
appointed by Kanaputti. Nagarjun’s previous three years’ experience in the closely
related work, made it possible for him to catch on to the routine work of his new
job more rapidly than was customary for a new employee. On several occasions,
Kanaputti noticed the tension developing between the two employees. However,
he didn’t want to get involved in their personal issues as long as the work was
completed effectively and efficiently by them. One day, the tension between them
reached the boiling point and Ramdas complained to
Kanaputti stating that his duties were being largely taken over by Nagarjun.
Kanaputti issued the order stating the clear allocation of the jobs and related
duties between the two. He further clarified the working relationship between
them by specifying who was to report to whom. This helped in reducing the
workload, enhancing productivity and removing ambiguity.
Identify and state the step of organizing process which has not been carried out
properly and contributed to this problem.
State the two steps of the organizing process which have been taken by Kanaputti
to respond to the complaint of Ramdas.
Also state two points of importance of organizing as reflected in the above case.
Answer
 The step of organizing process which has not been carried out properly and
contributed to this problem is Assignment of duties.
o Assignment of Duties: Once departments have been created each of them is
placed under the charge of an individual and then jobs are allocated to the
members as per their job positions.
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 The two steps of the organizing process which have been taken by Kanaputti to
respond to the complaint of Ramdas are listed below:
o Assigning the duties
o Establishing reporting relationship.
 The two points of importance of organizing as reflected in the above case are
described below:
o Optimum utilization of resources: Organising ensures best possible use of all
forms of resources i.e. physical, financial and human resource. It ensures
systematic assignment of jobs thereby curbing overlapping of work and
avoiding possibilities of duplication of work. This helps in preventing confusion
and minimising the wastage of resources and efforts.
o Adaptation to change: The process of organising provides stability to the
enterprise as it can then continue to survive and grow inspite of changes in the
business environment. It enables the organisation structure to be suitably
modified and the revision of inter-relationships amongst managerial levels to
pave the way for a smooth transition.
Question :3
Shan Spices Ltd.” are the manufacturer of different food specific spices like Rajmaa
Masala, Cholley Masala, Aaloo Parantha Masala etc. Mr. Raghav, the owner of the
company has created different departments for purchase, production, marketing,
finance and human resource. There are thirty employees working in the
organisation. Planning is of paramount importance to the company as Mr. Raghav
believes that effective planning leads to achievement of organisational objectives.
So in order to make employees focus on objectives, he issued instructions that
during working hours only official matters will be discussed. He made certain rules
and code of conduct for the employees to follow, according to which employees
are not allowed to visit and talk to the employees of other departments except for
official work. He emphasised on work performance which resulted in smooth
functioning of the organisation.
Identify and state the type of organisation mentioned in the above para.
State one feature of the concept identified in part (a) as mentioned in the above
para.
What was the purpose behind the formulation of rules for the employees that
restricted their personal communication with the employees of other
departments?
State two values violated by Mr. Raghav.
Answer:
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 Formal organisation is the type of organisation mentioned in the above
paragraph. Formal organisation refers to the organisation structure which is
deliberately created by the management to accomplish a particular task. It
clearly defines the boundaries of authority and responsibility and facilitates
systematic coordination among the various activities to achieve organisational
goals.
 One feature of formal organisation is that it clarifies who has to report to
whom by specifying the relationships among various job positions and the
nature of their interrelationship.
 The purpose behind the formulation of rules for the employees that restricted
their personal communication with the employees of other departments is to
ensure discipline at workplace and avoid wastage of time. This is help to curb
the emergence of informal organisation to a certain extend and increase work
efficiency.
 The two values violated by Mr. Raghav are:
o Liberty to employees
o Fulfilment of emotional needs
Question:4
Steelo Ltd. decided to set-up its steel manufacturing factory in the backward area
of Orissa where very less job opportunities were available. People of that area
welcomed this effort of Steelo Ltd. To attract people to work in its factory, it also
decided to provide many other facilities like a school, hospital, market, etc. in the
factory premises.
Steelo Ltd. started earning huge profits. Another competing company asked its
production manager Aslam to investigate the reasons of earning huge profits by
Steelo Ltd.
Aslam found that in both the companies, there was systematic coordination
among the various activities to achieve the organisational goals. Every employee
knew who was responsible and accountable to whom. The only difference was that
in his organisation, communication took place only through the scalar chain
whereas Steelo Ltd. was allowing the flow of communication in all the directions as
per the requirement which led to faster spread of information as well as quick
feedback.
Identify the type of organisation which permits Steelo Ltd. the flow of
communication in all the directions.
State another advantage of the type of organisation identified in part (1) above.
State any two values which Steelo Ltd. wanted to communicate to society.
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Answer
 An informal organisation permits the flow of communication in all the
directions in My Car Ltd.
 Another advantage of informal organisation is that it helps to fulfill the social
needs of the members by giving them a sense of belongingness in the
organisation and enhances their job satisfaction.
 The two values that My Car Ltd. wants to communicate to the society are:
o Trust
o Social Responsibility
Question:5
Kiran Industries is a company dealing in office furniture. The company chose to
diversify its operations to improve its growth potential and increase market share.
As the project was important, many alternatives were generated for the purpose
and were thoroughly discussed amongst the members of the organisation. After
evaluating the various alternatives, Sukhvinder, the Managing Director of the
company, decided that they should add ‘Home Interiors and Furnishings’ as a new
line of business activity.
Name the framework, which the diversified organisation should adopt, to enable it
to cope with the emerging complexity? Give one reason in support of your answer.
State any two limitations of this framework
Answer
 Divisional structure should be adopted by the diversified organisation to enable
it to cope with the emerging complexity.
 Reason: It leads to faster decision making, promotes flexibility and initiative
because each division functions as an autonomous unit.
 The two limitations of divisional structure are as follows:
o There may be conflicts among the different divisions heads as in pursuit of
higher profits, each of them may seek maximum allocation of resources at the
cost of other divisions.
o The cost is high as each division is provided with separate set of similar
functions.
Question:6
Rajeev, the owner of Pathways Constructions, decided to start a campaign to
create awareness among people for developing clean surroundings in their area.
He formed a team of 10 members to list the different ways for cleaning the
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surroundings. One suggested to take the help of local residents, another suggested
that they may involve school-going children in their venture. One more suggestion
was to take the help of the unemployed youth. On evaluation of different ways, it
was decided to take the help of local residents. To achieve the desired goal,
various activities are identified like Purchase of necessary items like dustbins,
garbage bags, brooms, etc.; Collection of garbage; Disposal of garbage, etc. After
identification of different activities, the work was allocated to different members.
Identify the concepts of management involved in the above situation and quote
the lines which help in their identification.
Also identify the values which the company wants to communicate to society.
Answer
 The concepts of management involved in the above situation are outlined
below:
o Planning: ” One suggested to take help of local residents, another suggested
that they may involve school going children in their venture. One more
suggestion was to take the help of the unemployed youth. On evaluation of
different ways, it was decided to take help of the local residents.”
o Organising: ” To achieve the desired goal, various activities are identified like
Purchase of necessary items like dustbins, garbage bags, brooms etc. Collection
of garbage Disposal of garbage, etc.
 After identification of different activities, the work was allocated to different
members.”
 The values which the company wants to communicate to society are:
o Cleanliness
o Responsibility
Question:7
Samir Gupta started a telecommunications company, ‘Donira Ltd.’, to manufacture
economical mobile phones for the Indian rural market with 15 employees. The
company did very well in its initial years. As the product was good and marketed
well, the demand of the products went up. To increase production, the company
decided to recruit additional employees. Samir Gupta, who was earlier taking all
the decisions for the company, had to selectively disperse the authority. He
believed that subordinates are competent, capable and resourceful and can
assume responsibility for the effective implementation of their decisions. This paid
off and the company was not only able to increase its production but also
expanded its product range.
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Identify the concept used by Samir Gupta through which he was able to steer his
company to greater heights.
Also explain any three points of importance of this concept.
Answer
 The concept used by Sameer Gupta/ Neeraj Gupta through which he is able to
steer his company to greater heights is Decentralisation.
 The three advantages of using decentralisation are as follows:
o Decentralisation helps to promote self-reliance and confidence amongst the
subordinates: When the subordinates are given freedom to take their own
decisions they learn to depend on their own judgment and develop solutions
for the various problems they encounter. Moreover, a decentralisation policy
helps to identify those executives who have the necessary potential to become
dynamic leaders.
o Relief to top management: Decentralisation reduces the need of direct
supervision and helps to save the time of top management for persuing other
important work.
o Quick decision-making: In a decentralised organisation, managers at all levels
are allowed to take such decisions independently which lie within their area of
jurisdiction. This makes the process of decision making much faster.
Question: 8
Alliance Ltd. is engaged in manufacturing plastic buckets. The objective of the
company is to manufacture 100 buckets a day. To achieve this, the efforts of all
departments are coordinated, and interlinked, and authority-responsibility
relationship is established among various job positions. There is clarity on who is to
report to whom. Name the function of management discussed above.
Answer:
 Organising
Question: 9
A company is manufacturing washing machines. There is a well-defined system of
jobs with a clear and definite authority, responsibility and accountability in the
company. But people are not allowed to interact beyond their officially defined
roles. As a result, the company is not able to adapt to the changing business
environment. The workforce is also not motivated due to lack of social interaction.
The company is facing problems of procedural delays and inadequate recognition
of creative talents.
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Suggest how the organisation can overcome the problems faced by it.
Give any two benefits it will derive from your suggestions.
Answer
 The organisation can overcome the problem faced by it by adopting informal
organisation.
 Informal organisation emerges from within the formal organisation when
people interact beyond their officially defined roles.
 The two benefits of informal organisation are as follows:
o It helps to fulfill the social needs of the members by giving them a sense of
belongingness in the organisation and enhances their job satisfaction.
o It contributes towards the fulfillment of organisational objectives by
compensating for inadequacies in the formal organisation.
Question:10
Ishita works as a corporate event coordinator in an event management company.
She has been made an overall official incharge for organizing a painting exhibition
for one of the clients of the company. For ensuring that the exhibition takes place
successfully, she identifies the various activities involved and divides the whole
work into various task groups like marketing committee, decoration committee
and reception committee. In order to facilitate coordination within and among
committees, she appoints a supervisor of each group. Each member in the group is
asked to report to their respective supervisors and all the supervisors are expected
to work as per Ishita’s orders.
Identify the function of management being performed by Ishita.
Describe briefly the various steps involved in the performance of the function of
management as identified in part (1) of the question.
Answer
 The Organising function of management is being performed by Ishita.
 The steps involved in the process of organizing are as follows:
o Identification and Division of Work: The first step in the process of organising
relates to identification and division of the work that has to be performed in
accordance with predetermined plans. This helps to avoid duplication of
activities and makes the work manageable. It also ensures that the burden of
work is being shared among the employees.
o Departmentalisation: The next step in the process involves grouping of similar
activities into departments, units, sections etc. using several criteria as a basis.
This facilitates specialization.
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o Assignment of Duties: Once departments have been created each of them is
placed under the charge of an individual and then jobs are allocated to the
members as per their job positions.
o Establishing Reporting Relationship: While assigning jobs each member is told
that from whom he /she has to take orders and to whom he/she will be
accountable. The establishment of such clear reporting relationships help to
create a well defined hierarchical structure. It also facilitates coordination
amongst various departments.
Question:11
After completing a course in travel and tourism, Karan started his own travel
agency. In order to ensure smooth functioning of his business, he decided to create
fourteen job positions divided into four departments on the basis of functions
namely, front office department including online queries, reservations department
for airways, railways and roadways, accommodation booking department, and
securing payments department. In order to avoid any interdepartmental conflicts
he decides to specify clearly the lines of authority and areas of responsibility for
each job position.
Which function of management is being described in the above lines?
Identify the framework created by Karan within which all managerial and operating
tasks are to be performed in his organisation.
Name the type of the framework as identified in part (1) of the question. Also, give
any two of its advantages.
Answer
 The Organising function of management is being described in the above lines.
 Organisational structure is the framework created by Karan within which all
managerial and operating tasks are to be performed in his organisation.
 Karan has created a functional structure as job positions are divided into four
departments on the basis of functions namely, front office department
including online queries, reservations department for airways, railways and
roadways, accommodation booking department, and securing payments
department.
 The two advantages of functional structure are as follows:
o A functional structure promotes work-related specialisation since it places
emphasis on specific functions. This helps to increase efficiency in utilisation of
manpower as employees perform similar tasks within a department and are
able to improve performance.
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o It facilitates control and coordination within a department because of similarity
in the tasks being performed.
Question: 12
As the head boy and head girl of Trakashay Public School’, Deepak Chugh and
Deepika Chawla have been given the responsibility of hosting the Teacher’s Day
programme in the school. In order to conduct the programme in a systematic way,
Deepak and Deepika first called a meeting of the student council. In the meeting
they decided about the content of the programme after taking into consideration
the different available alternatives and choosing the best alternative among them.
Then the various tasks required to be performed were identified and divided in
accordance with predetermined schedule made by them. After that they grouped
the similar activities into main groups as skit group, choir group, instrumental
music group and contemporary dance group. Then each group was placed under
the charge of a council member in accordance with his/her skills and
competencies. These council members were in turn informed that they have to
take orders and will be accountable only to Deepak and Deepika so as to facilitate
coordination amongst various groups.
Identify and explain the functions of management being discussed.
Describe briefly any two points highlighting the importance of each of the
functions of management as identified in part (1) of the question.
State any two values that ‘Prakashay Public School’ wants to communicate to
society.
Answer
 The Planning and Organising functions of management are being discussed.
 Planning is deciding in advance what to do, how to do, when to do and who
has to do it. It is one of the basic managerial functions. Thus, it involves setting
objectives and developing an appropriate course of action to achieve these
objectives. Organising is the process of defining and grouping the activities of
the enterprise and establishing authority relationships among them.
 The importance of the planning function of management is described below:
o Planning provides directions: The well defined plans act as a guide for deciding
what course of action should be taken to attain the organisational goals.
o Planning reduces the risk of uncertainty: Planning helps to reduce the risk of
uncertainty arising due to the dynamic nature of business environment as it
enables a manager to anticipate and meet changes effectively.
o The importance of the organizing function of management is described below:
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o Benefits of specialisation: Organising leads to a systematic allocation of jobs
amongst the work force. This not only helps to reduce the workload of the
employees but also leads to increased productivity. This is because of the fact
that specific employees are assigned specific job on a regular basis which leads
to specialisation.
o Clarity in working relationships: The process of organising leads to
establishment of clear cut reporting relationships. This helps in developing a
hierarchical order thereby enabling the fixation of responsibility and
specification of the extent of authority to be exercised by an individual.
 The two values that Trakashay Public School’ wants to communicate to society
are:
o Trust
o Participation
Question:13
The activities and employees in ‘Elegance Pvt. Ltd.’, a footwear manufacturing
company, can be broadly grouped into five departments namely; production,
purchase, marketing, accounts and personnel. Over the years the company has
grown and expanded its operations manifolds. The company now intends to
diversify into leather bags segment. So its management has decided to restructure
its operations. They plan to create separate product divisions for each product line
wherein the functioning of each division will be further divided into five
departments namely; production, purchase, marketing, accounts and personnel.
How is the company’s future organisational structures likely to be different from
the existing one?
Answer
 At present, the company is following functional structure and it intends to
adopt a divisional structure in future.
Question: 14
Rahunath works as a human resource manager in ‘Vanshika Housing Ltd.’ a
company engaged in the real estate business. He suggests to the Managing
Director of the company to start a sports club in the office where friendly indoor
matches can be organised amongst the employees on every Saturday.
Identify the type of organisation that Rahunath is desirous of promoting in the
company.
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State any three advantages of the type of organisation as identified in part (a) of
the question.
Answer
 Informal organisation is the type of organisation that Rahunath is desirous of
promoting in the company.
 The three advantages of informal organisation are stated below:
o It leads to faster spread of information as well as facilitates quick feedback.
o It helps to fulfill the social needs of the members by giving them a sense of
belongingness in the organisation and enhances their job satisfaction.
o It contributes towards the fulfillment of organisational objectives by
compensating for inadequacies in the formal organisation.
Question 15
Smriti works as a marketing manager in a small company. The company has
recently launched a new brand of room fresheners through aggressive promotion.
However, the product is less in demand and its sales are low. Smriti decides to
study the reasons for the poor likability of the product through a market research.
Keeping in view the volume of work, she knows it will be impractical for her to
handle it all by herself. In order to share her work, she deploys a team of
executives. She gives them the necessary authority and assigns them the
responsibility to conduct the research and report back to her so that she can make
the decisions.
Identify and explain the concept used by Smriti to share her work and authority
with her subordinates.
Answer
 The concept used by Smriti to share her work and authority with her
subordinates is Delegation of authority.
 Delegation of authority merely means the granting of authority to subordinates
to operate within prescribed limits.
Question: 16
Atul joins as a Regional Sales Head in the export division of a FMCG (fast moving
consumer goods) company. In a departmental meeting, he asks one of this
subordinates, Manik, to take charge of the company’s new office in Dubai. He
allocates the work to him and grants the necessary authority. However, within a
month by seeking regular feedback on the extent of work accomplished from
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Manik, Atul realises that Manik is not doing the work as per his expectations. So he
takes away the authority delegated to him and re delegates the work to Prakrit.
Due to the time wasted in this switch over, the work at the Dubai office suffers
tremendously and the company is not able to meet its desired goals.
Why is Manik supposed to give regular feedback about work to Atul?
Can the authority granted to a subordinate be taken back and re-delegated to
another person?
Can Manik be held responsible for not meeting the work related expectations of
Atul? Give a suitable reason in support of your answer.
Answer
 Manik is supposed to give regular feedback about work to Atul as he has been
granted authority and entrusted responsibility, so he remains answerable for
the outcome.
 Yes, the authority granted to a subordinate can be taken back and re-delegated
to another person.
 Yes, Manik can be held responsible for not meeting the work related
expectations of Atul as it is the obligation of a subordinate to perform the
assigned duty to the best of his ability and skill.
Question: 17
Srijan is working as a sales manager in a publishing house. In order the promote
the new series of encyclopaedias, the company decides to undertake door to door
selling in the city. As the sales manager, Srijan is given the target of selling 5000
units in one month. He appoints a team of five salesmen for the purpose. Each
salesman is given the target of selling 1000 units. At the end of the month only
4800 units are sold as one of the salesman, Bobby, falls ill during the last week and
is able to sell only 800 units.
Will Srijan be still accountable for the performance of the assigned tasks to Bobby?
Why or why not? Give a suitable reason to support your answer.
Answer
 Yes, Srijan will still be accountable for the performance of the assigned tasks to
Bobby because only the responsibility for the work assigned can be delegated.
The ultimate responsibility of a superior is absolute and cannot be delegated.
Thus, irrespective of the extent of delegated authority, the manager shall still
be accountable to the same extent as before delegation.
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Question: 18
Sudhir is working as a purchase manager in a power sector compahy. All his
subordinates hold him in high regard for his exceptional managerial skills. On one
hand, as a manager, he is a tough task master and expects strict compliance to the
organisational rules and procedures from his subordinates. On the other hand, he
makes conscious efforts to develop rapport with his subordinates by interacting
freely with them during the lunch breaks in the cafeteria. Many a times these chit
chats helps him to get an insight into the views and opinions of his team members
about the policies of the organisation.
In the context of the case:
Identify and explain the two types of organisations have been discussed.
Answer
 Formal organisation and Informal organisation are the two types of
organisations which have been discussed.
 Formal organisation is the structure of authority relationships created
deliberately by the management to achieve its objectives.
 Informal organisation is a network of social relationships arising out of the
interaction among employees within an organisation.
Question: 19
Rakesh joins as a Head Librarian of a newly constructed medical college in Pune. A
team of four librarians is placed under him for the smooth functioning of the
library. Besides, he has been assigned eight people as support service staff. On the
second day of his joining, he is told get a shipment of new books unloaded, stock
the bookshelves, and then get all waste (packaging, paper etc.) disposed off within
a week’s time. In order to ensure orderliness and speed in the process of setting up
of the library, he makes each of the four librarians in charge of five different
subjects. Keeping in mind their competence and experience he decides to give
them more authority so that they can make autonomous plans and assume the
responsibility for the effective implementation of their decisions.
Identify and explain the concept used by Rakesh keeping in mind the competence
and experience of the other librarians.
Describe briefly any three advantages of using the concept as identified in part (a)
of the question.
Answer
 Rakesh has used the concept of decentralisation keeping in mind the
competence and experience of the other librarians.
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 The three advantages of using decentralisation are as follows:
o Decentralisation helps to promote self-reliance and confidence amongst the
subordinates: When the subordinates are given freedom to take their own
decisions, they learn to depend on their own judgment and develop solutions
for the various problems they encounter. Moreover, a decentralisation policy
helps to identify those executives who have the necessary potential to become
dynamic leaders.
o Relief to top management: Decentralisation reduces the need of direct
supervision and helps to save the time of top management for persuing other
important work.
o Quick decision making: In a decentralised organisation managers at all levels
are allowed to take such decisions independently which lie within their area of
jurisdiction. This makes the process of decision making much faster.
Question: 20
Home Creations Ltd.’ is a well-known chain of large department store offering
various types of products under one roof. The company owns fifty stores in various
parts of the country. Each store is placed under the charge of a manager who is
allowed to run their stores autonomously by deciding about the products which
may be promoted, appointment of staff, ways to handle customer complaints etc.
As these managers have a deeper knowledge of the local situations, it enables
them to take these decisions effectively keeping in view the local circumstances
and consumers’ needs. This approach helps to improve customer service and at
the same time serves to boost morale and increase the job satisfaction of the store
managers as it empowers them to innovate and use their initiatives.
In the context of above case:
Identify and explain the policy followed by ‘Home Creations Ltd.’ to run their stores
successfully.
Also, give any three points highlighting the importance of the approach followed as
identified in part (1) of the question.
List any two values that ‘Home Creations Ltd.’ wants to communicate to its
employees.
Answer
 The approach followed by ‘Home Creations Ltd.’ to run their stores successfully
is Decentralisation. Decentralisation refers to systematic effort to delegate to
the lowest level all authority except that which can be exercised at central
points.
 The importance of decentralisation is highlighted through the following points:
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o Develops initiative among subordinates: Decentralisation helps to promote self
reliance and confidence amongst the subordinates. The lower managerial
levels are empowered to take their own decisions and they learn to depend on
their own judgment. This helps to identify those executives who have the
necessary potential to become dynamic leaders.
o Develops managerial talent for the future: Decentralisation is an effective
means for training employees to use their talent in real life situations as it
provides them many opportunities to prove their abilities. Thus, it helps to
create a pool of qualified employees who may be considered to fill up
challenging job positions internally through promotions. At the same also it so
helps to identify those employees who may not be successful in assuming
greater responsibility.
o Quick decision making: Decentralisation facilitates quick decision making as the
employees are allowed to act independently within their area of jurisdiction.
 The two values that ‘Home Creations Ltd.’ wants to communicate to its
employees are:
o Initiative
o Trust
Question: 21
Kabir opens a retail mart in a local market. As he knows it will be impossible for
him to handle all work alone, he appoints Jasraj to perform tasks on his behalf
thereby reducing his workload. This decision provided Kabir with more time to
concentrate on important matters. Besides, he recruits eight other persons as
support staff. Over the years his business earns a good name for itself. So he opens
another outlet in the city. Considering Jasraj’s competence, he gives the
independent charge of running the new outlet to him, thereby empowering him by
giving him autonomy in functioning of the outlet.
Identify the two concepts which reflect the transition in the role of Jasraj in the
above paragraph.
What are the factors that Karan must keep while giving the independent charge of
the new outlet to Jasraj?
Answer
 Delegation of authority: In the initial years of business, Jasraj’s role is
restricted. He is granted limited authority to perform tasks on behalf of Kabir
to reduce his workload and provide him with more time to concentrate on
important matters.
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 Decentralisation of authority: When Jasraj is given an independent charge of
the new outlet, he is empowered to take decisions autonomously to ensure
successful running of the outlet.
 Karan needs to be careful while selecting those decisions related to the outlet
which will be taken by Jasraj independently and those that will be retained
with him. It is important to define the decision making powers as complete
decentralisation would imply the delegation of all decision making functions to
Jasraj and this would obviate Karan’s role as the owner of the business.
Question: 22
Karan and Arjun are first cousins. After completing a course in journalism, both of
them join a leading newspaper company as sub-editors. Over the years, due to
their consistent hardwork, they are promoted to the post of chief editors in
different divisions. However, the way of their functioning is totally different. Karan
believes in the capabilities of his subordinates and therefore follows the
philosophy of selective dispersal of authority throughout all the levels in his
division. On the other hand, Arjun prefers to function through strict controls and
retains all the decision-making authority with himself.
How do Karan and Arjun differ in their policies related to the extent of delegation
of authority? Explain.
Answer
 Karan has adopted a decentralisation policy as he believes in the capabilities of
his subordinates. He follows the philosophy of selective dispersal of authority
throughout all the levels in his division.
 Whereas Arjun follows a policy of centralisation as he prefers to function
through strict controls and retains all the decision-making authority with
himself.
Question: 23
Rats & Fleas’ is a pesticide producing company. The company identifies the various
types of activities to be done. For this it divides the work into various departments.
The company then gets involved in its business with a lot of zeal.
After one year of successful run the company decides to transfer the decision-
making authority to the lower most level of the employees. For this a major policy
decision is taken.
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Identify the function of management highlighted above and another concept also.
Give the next two steps of this function. Also give one importance of the other
concept which you have identified.
Answer
 The function of management highlighted in the above case is ‘Organising’. This
can be seen in the first paragraph.
 The other concept of management which is highlighted in the second
paragraph is ‘Decentralisation’. After one year of successful run the company
decides to transfer the decision-making authority to the lower most level of the
employees. For this a major policy decision is taken.
 The next two steps of this function ‘Organising’ is
o Assignment of duties and
o Establishing reporting relationships.
 One importance of ‘Decentralisation’ is Relief to the top management.
Question :24
Due to proper organizing and division of work, a company goes for systematic
assignment of jobs among the employees, wmch importance of organizing is
highlighted here? Give three more importance of organizing?
Answer
 The importance of organizing which is highlighted here is ‘Benefits of
specialisation’.
 Three more importance of organizing:
o Clarity in working relationship.
o Adaptation to change.
o Effective administration.
Question:25
A school principal believes in proper organizing. He time and again tells his staff to
be organized as he believes that through proper organising they can move away
from present norms and accept new challenges with success. They will be able to
add more activities and projects in their yearly plan.
Which importance of organizing has been indicated in the above paragraph?
What is Organisation Structure? Which type of organisation is ‘School’?
Answer
 A school principal believes in proper organizing. He time and again tells his staff
to be organized as he believes that through proper organising they can move
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away from present norms and accept new challenges with success. They will be
able to add more activities and projects in their yearly plan.
 The importance of organizing which is indicated above is ‘Expansion and
Grdwth’. Organisation structure is the framework within which managerial and
operational tasks are performed within an organisation. It explains the
relationship between people, the work to be done by them and the resources
to be utilized by them.
 School is a formal organisation.
Question:26
Aasmaan Colours’ is a profit making colour producing company. The company
deals in making different types of colours used in painting. The organisation has
always been systematic in its approach and due to good organizing has seen a
continuous increase in its revenue. Workers are given their respective jobs clearly
which leads to gaining of experience since they do their respective jobs on a
regular basis leading to high
productivity. The organisation has many challenges, and it wants to improve. There
is no doubt in the lines of communication, and everyone knows who has to report
whom. With passage of time, there is more need to connect with the employees.
They are the most important asset to the organisation. When managers delegate
work to their subordinates they set themselves free from routine jobs and this
leads to great amount of learning for the subordinates in practical situations.
Which importance of organizing has been highlighted in the above case?
How would a company adapt to changes with the help of organizing?
Answer
 The importance of organizing highlighted in the above case:
o Benefits of specialisation. Workers are given their respective jobs clearly which
leads to gaining of experience since they do their respective jobs on a regular
basis leading to high productivity.
o Clarity of working relationships. There is no doubt in the lines of
communication, and everyone knows who has to report to whom.
o Development of personnel. When managers delegate work to their
subordinates they set themselves free from routine jobs and this leads to great
amount of learning for the subordinates in practical situations.
o The company would adapt to the changes in the environment by modifying the
organisation structure according to the requirement. The relationships among
various job positions can be altered or changed according to the requirements.
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Even if a change is required in the managerial levels the Company may have to
go ahead with it.
Question: 27
An organisation is working by clubbing similar related jobs under different
departments. The HR department is not in direct touch with the Marketing
Department, and this has created problems. The HR head feels that he only knows
about the HR department and similar is the case with the Marketing department.
However, the truth is both of them have limited and specific skills.
Which type of organisation structure does this organisation has? What will be the
outcome of this mode of thinking in the near future for the organisation? Name
one more disadvantage of this type of organisation structure?
Answer
 The type of organisation structure which is present is functional structure.
Similar related jobs are clubbed under one department.
 The reason for the limited scope of vision for both these department heads is
their limited set of skills and knowledge only about their departments. In the
future these departmental heads won’t be able to reach the top most level of
management. This means their managerial development will not reach its peak
because people at the top management should have knowledge about every
department.
 One more disadvantage of this type of structure is the resulting of conflicts.
Question: 28
Identify the following into formal and informal organisation:
1. Mountain cold storage has a well defined structure of authority
relationships. This structure is created after a lot of planning by the top level
management.
2. Tanuj Drinks is an organisation which helps quench the thirst of people
sitting on roadside and parks on Sundays. This organisation has originated
from Mountain cold storage spontaneously.
3. An organisation holds its meeting according to the mood of the members. It
has no set pattern of behavior.
4. An organisation which is run in Central Delhi is known for its rigid nature.
5. Cricket Club is an organisation in which the authority of the members,
constituting it, is because of their positions in the management.
6. Translife is an organisation in which only the managers are the leaders.
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Answer
1. Formal Organisation. As it is a structure of authority relationships.
2. Informal Organisation. It emerged spontaneously from a formal organisation.
3. Informal Organisation. No set pattern of behaviour is there.
4. Formal Organisation. It has rigid nature.
5. Formal Organisation. Authority of the members is due to their position in the
management.
6. Formal Organisation. Only managers because of their formal positions are
leaders not because of their personal qualities.
Question: 29
Steelo Ltd/ decided to set-up its steel manufacturing factory in the backward area
of Orissa where very less job opportunities were available. People of that area
welcomed this effort of ‘Steelo Ltd.’ To attract people to work in its factory it also
decided to provide many other facilities like school, hospital, market, etc. in the
factory premises.
‘Steelo Ltd.’ started earning huge profits. Another competing company asked its
production manager ‘Aslam’ to investigate the reasons of earning huge profits by
‘Steelo Ltd.’
Aslam found that in both the companies there was systematic coordination among
the various activities to achieve organizational goals. Every employee knew who
was responsible and accountable to whom. The only difference was that in his
organization communication took place only through the scalar chain whereas
‘Steelo Ltd.’ was allowing flow of communication in all the directions as per the
requirement which lead to faster spread of information as well as quick feedback.
Identify the type of organization which permits ‘Steelo Ltd.’ the flow of
communication in all the directions.
State another advantage of the type of organization identified in (a) above.
State any two values which ‘Steelo Ltd.’ wanted to communicate to the society
Answer
 Informal organization
 Advantage. Informal organization helps in fulfilling the social and affiliation
needs of the members of the organization and thus enhances the level of job
satisfaction.
 Two values communicated by Steelo Ltd. are:
o Development of backward area thereby fulfilling social responsibility.
o Providing employment to the needy and creating employment opportunities.
Question: 30
136
Lalit has joined a manufacturing firm as a worker. He has recently started working
on the shop floor. The management is quite liberal and has allowed the workers to
form a hockey club. The workers assemble and play hockey in the evening after the
completion of their work. However the management is a little worried about the
outcomes. The management is trying to change the schedule of the workers, but
they are unsure about the reaction of the workers. Though majority of the workers
are sincere, like Lalit, yet the management is concerned about their companions in
the hockey club.
Which type of organisation is the hockey club? Name two disadvantages which you
can predict from the above case?
Answer
 The type of organisation which is discussed above is Informal Organisation
(Hockey Club). The two disadvantages which can come up in the above case
are:
o The management may be unsuccessful in implementing changes. As here the
management is trying to implement changes and the hockey club members
may oppose them by showing unity.
o The informal organisation (hockey club) may pressurize the workers to agree to
its demand and this can affect the interests of the organisation in a bad
manner.
Question :31
Lalit has joined a manufacturing firm as a worker. He has recently started working
on the shop floor. The management is quite liberal and has allowed the workers to
form a hockey club. The workers assemble and play hockey in the evening after the
completion of their work. However, the management is a little worried about the
outcomes. The management is trying to change the schedule of the workers, but
they are unsure about the reaction of the workers. Though majority of the workers
are sincere, like Lalit, yet the management is concerned about their companions in
the hockey club.
Which type of organisation is the hockey club? Name two disadvantages which you
can predict from the above case?
Answer
 The type of organisation which is discussed above is Informal Organisation
(Hockey Club).
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 The two disadvantages which can come up in the above case are:
o The management may be unsuccessful in implementing changes. As here the
management is trying to implement changes and the hockey club members
may oppose them by showing unity.
o The informal organisation (hockey club) may pressurize the workers to agree to
its demand and this can affect the interests of the organisation in a bad
manner.
Question: 32
A company has been registered under the Companies Act with an authorized share
capital of Rs.20,000 crores. Its registered office is situated in Delhi and
manufacturing unit in a backward district of Rajasthan. Its marketing department is
situated in Bhopal. The company is manufacturing Fast Moving Consumer Goods
(FMCG).
Suggest with the help of a diagram a suitable organisation structure for the
company.
State any three advantages of this organisation structure.
Answer
 Divisional structure:
 Advantages of Divisional Structures:
o Product specialisation helps in development of varied skills.
o Helps in fixation of responsibility.
o Promotes flexibility as each division is autonomous.
o Facilitates expansion and growth.
Question: 33
Ajanta Foods Ltd. is engaged in the trading of ‘Noodles’. It has its registered office
in Kolkata, manufacturing unit in Solan and marketing department at Delhi. Which
type of organisational structure the company should adopt to achieve its target?
Answer
 Functional Organisation Structure.
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Question: 34
A Company named Mahi Cycles has decided to start a new branch in the Middle
East. The company has recognised the amount of work to be done in number of
hours. The company has found out that it will take 25000 hours of man work and
has subsequently divided the number of hours for different operations. The real
challenges of the company begin here. Very methodically responsibility of the
recognized amount of work has been given to different individuals according to
their capabilities.
Which function of management is highlighted above? Identify the two steps of this
function indicated above.
Answer
 The function of management which is highlighted above is ‘Organising’.
 The two steps of Organising which are indicated in the above case are:
o Step 1: Identification and division of work. The Company has found out that it
will take 25000 hours of man work and has subsequently divided the number
of hours for different operations.
o Step 2: Assignment of duties. Very methodically responsibility of the
recognized amount of work has been given to different individuals according to
their capabilities.
Question: 35
Rolling Eagle is an organised firm. The firm has been considered as one of the
major producers of steel in the manufacturing industry. A group of people from
foreign countries have come to India to find out the reason for their success. They
found that there is proper utilisation of resources and this has led to a great
control of management over every aspect. The company has reached this place
after a lot of research and its application. Every person knows what he has to do
and this has led to the achievement of great skill development at ‘per employee
level’. The company has a monitoring cell which keeps track of all the major
developments around. This has made it possible for the company to change itself
according to the requirements of the outside environment.
In the above case which concept of management is highlighted? Discuss its three
types highlighted in the above case?
Answer
 The concept of management which is highlighted above is ‘Importance of
Organising’.
 The three different types of’Importance of Organising” indicated above are:
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o Optimum utilisation of resources and effective administration. They found that
there is proper utilisation of resources and this has led to great control of
management over every aspect.
o Basis of specialisation. Every person knows what he has to do, and this has led
to the achievement of great skill development at ‘per employee level’.
o Adaptation to change. This has made it possible for the company to change
itself according to the requirements of the outside environment.
Question: 36
Identify the category of ‘Organisation A’ in the following cases:
1. Organisation A originates from an organisation B which runs on rules and
procedures. It has originated due to personal interaction among employees
of organisation B.
2. Organisation A follows independent channels of communication.
3. Organisation A has a definite framework for the fulfillment of operational
tasks.
4. Organisation A emerges spontaneously and is not willingly created by the
management.
5. Organisaiton A helps in coordinating and streamlining the functioning of
different departments.
6. Organisation A gives more stress on targets to be completed than the
interpersonal relationships among the workers.
7. The behavior of members of Organisation A is not dependent on the rules
and procedures of the parent organisation B (from which it has emerged).
8. There is lot of delay in decision making as the established chain of command
is followed in Organisation A.
9. Organisation A helps in fulfilling the social needs of the members as they find
likeminded people.
10. Organsiation A is deliberately created by the top management.
Answer
1. Informal organization
2. Informal organisation
3. Formal organisation
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Question: 37
Aman Chadha started ‘Bulls Eye’ a company for providing cyber security solutions
to businesses. Its objective is to prevent, detect and respond to cyber attacks and
protect critical data. He was a hardworking software engineer and an expert in
cyber security. His reputation grew by leaps and bounds as he was not only a
person of integrity but also did his work with utmost honesty and sincerity.
The business started growing day by day.
He was delighted when he was offered a big project by the Ministry of Defence.
While working on the project, he found that the volume of work made it
impractical for him to handle all the work by himself. He decided to expand the
team. The company maintained a close liaison with a local engineering college.
During a campus placement, Ishan and Vrinda were appointed to work for the new
project.
He found the new employees capable, enthusiastic and trustworthy. Aman Chadha
was thus, able to focus on objectives and with the help of Ishan and Vrinda, the
project was completed on time. Not only this Aman Chadha was also able to
extend his area of operations. On the other hand Ishan and Vrinda also got
opportunities to develop and exercise initiative,
Identify and briefly explain the concept used by Aman Chadha in the above case
Also, state any four points of importance of the concept identified in (a) above.
Answer
 The concept used by Aman Chadha in the above case is delegation. Delegation
is the entrustment of responsibility and authority to another and the creation
of accountability for performance which helps a manager to extend his area of
operations.
 Importance of delegation:
o Effective management. By delegation managers get freedom from doing
routine work. They get more time to concentrate on important matters.
o Employee development. As a result of delegation, employees get more
opportunities to develop new skills. It makes them better future managers.
o Motivation of subordinates. Delegation of authority enhances the status of
subordinates; and provides motivation to them, to improve their performance.
o Facilitates organisational growth. Delegation helps in growth and expansion of
the organisation by providing a ready workforce to take higher level
responsibilities.
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o Basis of management hierarchy. Delegation of authority establishes superior-
subordinate relationship which is the basis of hierarchy of management.
Question: 38
Alpha Tonics is a progressive company which has achieved new records in the field
of medicines. Recently the company decided to go for a major shift in policy
decision by handing over the decision-making authority to the lower most level of
employees. For this the company went for a thorough planning. Within four
months the positive results of this major policy decision were recognizable. The
employees felt a lot of development in their skill of taking first step to manage
things on their own. Some major newspapers also covered this development. The
production of the company increased. The company’s top management could now
focus on new areas of innovation as the employees turned more reliable.
One day it so happened that the company’s manufacturing branch in south could
not fulfill even half of its production target and the operations manager was held
answerable for the assigned target. He was called in the office. When he was
questioned it was found that his right to command the workers was insufficient
and it should have been more to create results. The management decided to listen
to him, and he was given more power. When he went to the shop floor, he told the
workers that the standard of behavior of the workers should come from the official
rules and procedures.
In the above case which concept of management has been related to in the first
paragraph of the case?
Which two advantages of this concept have been highlighted in the above case?
Which two elements of delegation have been highlighted in the second paragraph
of the case?
Which one feature of the informal organisation has been opposed by the
operations manager in the above case?
Answer
 The concept of management highlighted in the first paragraph of the case is
‘Decentralisation’. Recently the company decided to go for a major shift in
policy decision by handing over the decision making authority to the lower
most level of employees.
 The two advantages highlighted of this concept are:
o It helps in development of initiative among subordinates. The employees felt a
lot of development in their skill of taking first steps to manage things on their
own.
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o It helps in developing managerial talent for the future. The Company’s top
management could now focus on new areas of innovation as the employees
turned more reliable.
 The two elements of delegation highlighted in the second paragraph of the
case are:
o Accountability. The operations manager was held answerable for the assigned
target.
o Authority. When he was questioned it was found that his right to command the
workers was insufficient.
 The feature of informal organisation which is opposed here is ‘the standards of
behavior originate from the group norms’ which should not be the case in a
formal organisation bounded by rules and procedures.
Question: 39
Arnav Electricals is a company which has in recent years adopted the decentralized
method of running the organisation. The company has grown dynamically, and the
decisions taken by the lower level management are implemented which saves time
as people taking decisions are near the point of action. However, recently
chairman of another manufacturing firm who is also a good friend of Arnav,
chairman of Arnav Electricals, met him and asked him how he could evaluate
performance of employees in case he goes for a decentralized approach. A few
hours later Amav’s secretary calls him and asks for the list of works to be done the
next day. He narrates him all the important tasks to be executed.
Which importance of decentralisation has been highlighted in the above case?
What advice do you think Arnav should give to have better control in a
decentralized organisation?
Which concept of organizing is taking place between Arnav and his secretary?
Which type of scope does this concept have?
Answer
 The importance of decentralisation which is highlighted above is Quick decision
making. (The company has grown dynamically and the decisions taken by the
lower level management are implemented which saves time as people taking
decisions are near the point of action).
o The advice that Arnav should give in order to get a better control is to make
the departments answerable for the final outcomes. Better control systems like
balance score card, management information system and observation through
CCTV cameras to be adopted to keep track of the employees’ performance.
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o The concept of organizing which is taking place between Arnav and his
secretary is ‘Delegation’. As it is a superior subordinate relationship involving
sharing of tasks of Arnav, the manager, here.
o Delegation has a narrow scope as it is limited to superior and his immediate
subordinate.
Question: 40
Mr. Manuj is an efficient manager working in a multinational company. He is fond
of completing all his work by himself. As a human being he is very good and
supportive and due to this he doesn’t want to put burden of work on others.
Sometimes he is so much involved in doing different types of works in the office
that he even misses the priorities areas.
Which concept of management is seen violated here? What is going to be another
disadvantage of this violation? Also identify one disadvantage given in this case.
Answer:
 The concept of management which is violated here is ‘Delegation’. He is fond
of completing all his work by himself.
 Another disadvantage. Employees need for recognition won’t be satisfied. They
won’t be able to develop their skills if they will not share tasks in actual work
environment.
 The disadvantage of violating delegation given in the case is the lack of priority
given by the manager to key areas as he is involved in tasks which can be
handled by his subordinates.
 Sometimes he is so much involved in doing different types of works in the
office that he even misses the priorities areas.
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Chapter 6 Staffing
Question:1
Alpha Enterprises is a company manufacturing water geyser. The company has a
functional structure with four main functions-Production, Marketing, Finance and
Human Resource. As the demand for the product grew, the company decided to
hire more employees.
Identify the concept which will help the Human Resource Manager in deciding the
actual number of persons required in each department.
Answer:
 Workload analysis is the concept which will help the Human Resource Manager
in deciding the actual number of persons required in each department.
Question :2
Bhagwati Enterprises is a company engaged in the marketing of air-conditioners of
a famous brand. The company has a functional structure with four main
functions—Purchase, Sales, Finance and Staffing. As the demand for the product
grew, the company decided to recruit more employees.
Idetify the concept which will help the Human Resource Manager to find out the
number and type of personel availale so that he could decide and recruit the
required number of persons for each department.
Answer:
 Workforce analysis will help the human resource manager to find out the
number and type of personnel available in the organization.
Question :3
Human Resource Management includes many specialized activities and duties
which the human resource personnel must perform. In the light of this statement,
explain any four such duties performed by Human Resource Manager.
Answer:
 Human Resource Management includes many specialised activities and duties
which the human resource personnel must perform. These duties are stated
below:
o Recruitment i.e., search for qualified people and stimulating them to apply for
the job within the organisation.
o Prepare job descriptions by analysing jobs, collecting information about jobs
etc.
o Developing suitable compensation and incentive plans for the employees.
o Designing appropriate training and development of employees to foster
efficient performance and career growth.
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Question: 4
Resolutions Pvt. Ltd. is a publishing company. Its book on Business Studies for class
XII is in great demand. As a result, the employees in the marketing department are
always racing against time. The employees have to work overtime and on holidays
to cater to the demand.
Managers in the marketing department are under stress as they have to handle
more than two territories. The work stress has led to dissatisfaction among the
employees and managers.
Name and explain the step of staffing process which has not been performed
properly.
State the next two stages immediately following the step identified in part ‘a’.
Answer:
 The step of staffing process which has not been performed properly is:
 Estimation of manpower requirements: It is the first step in the staffing process
and is carried out with the help of workload analysis (assessment of the
number and types of human resources necessary for the performance of
various jobs and accomplishment of organisational objectives) and work force
analysis (assessment of the number and type available).
 The next two stages immediately following the step Estimation of manpower
requirement are as follows:
o Recruitment: Recruitment may be defined as the process of searching for
prospective employees and stimulating them to apply for jobs in the
organisation.
o Selection: Selection is the process of choosing the best candidate from a pool
of applicants.
Question:5
Joseph Bros is a firm manufacturing jute lampshades. It uses leftover jute pieces
from various jute factories to manufacture economical lampshades which are
supplied to various hotels in nearby towns. It employs men and women from
nearby villages as workers for creating good lampshade designs.
Joseph Bros, is not able to meet its targets. Namish, the supervisor of the
company, was told to analyse the reasons for the poor performance. Namish found
the following problems and suggested certain solutions in the working of the
business. The number of workers employed was less than what was required for
the work. As a result, the existing workers were overburdened. The firm decided to
search for new workers and it asked the present employees to introduce
candidates or recommend their friends and relatives to the firm. This enabled the
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firm to ‘put people to jobs’ and assured the attainment of objectives according to
plans.
Identify the functions of management being performed by the firm in the above
situation.
Name the concept and its source used by the firm to attract more workers for the
firm.
State any two values being followed by Jacob Bros.
Answer:
 The ‘Staffing’ function of management is being performed by the firm.
 Recruitment is the concept used by the firm to attract more workers to the
firm.
 The firm is planning to use the external source of recruitment i.e
‘Recommendation of present employees’ to attract more workers to the firm.
 The two values that are being followed by Jacob Bros are:
o Generating employment
o Optimum utilisation of resources.
Question :6
Mrs. Rajlaxmi is working as the Human Resource Consultant in a firm that
manufactures cosmetics, which is facing a problem of high employee turnover. The
CEO of the company has invited suggestion from her for retaining the talented
employees and reducing the employee turnover. Mrs. Rajlaxmi recommends that
the good employees be rewarded in a way that it creates a feeling of ownership
among the employees and at the same time, makes them contribute towards the
growth of the organisation.
Identify the incentive and explain its type which has been suggested by Mrs.
Rajlaxmi to the CEO of the company.
Also explain any two other incentives of the same type.
Answer:
 Co-partnership / stock option, which is a type of financial incentive, has been
suggested by Mrs. Rajlaxmi to the CEO of the company.
 The two other financial incentives are described below:
 Retirement Benefits: An organisation may provide several retirement benefits
to its employees after their retirement such as provident fund, pension and
gratuity which provide financial security. These benefits serve as an incentive
when they are in service in the organisation.
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 Perquisites: In many company’s perquisites and fringe benefits are offered over
and above the salary such as car allowance, housing, medical aid, and
education to the children etc.
Question :7
Ashish, the Marketing Head, Raman, the Assistant Manager and Jyoti, the Human
Resource Manager of Senor Enterprises Ltd. decided to leave the company.
The Chief Executive Officer of the company called Jyoti, the Human Resource
Manager and requested her to fill up the vacancies before leaving the
organisation. Informing that her subordinate Miss Alka Pandit was very competent
and trustworthy, Jyoti suggested that if she could be moved up in the hierarchy,
she would do the needful. The Chief Executive Officer agreecs for the same. Miss
Alka Pandit contacted Keith Recruiters who advertised for the post of marketing
head for Senor Enterprises Ltd. They were able to recruit a suitable candidate for
the company.
Raman’s vacancy was filled up by screening the database of unsolicited
applications lying in the office.
Name the internal/external sources of recruitment used by Senor Enterprises Ltd.
to fill up the above stated vacancies.
Also state any one merit of each of the above identified source of recruitment.
Answer:
 The internal and external sources of recruitment used by Senor Enterprise Ltd.
to fill up the above stated vacancies are stated below:
 The vacancy for the post of Human Resource Manager has been filled up
through Promotion.
 The vacancy for the post of Marketing Head has been filled up through the
Placement Agencies and Management Consultants.
 The vacancy for the post of Assistant Manager has been filled up through
Casual Callers.
 The relative merit of each of the internal and external sources of recruitment
used by Senor Enterprise Ltd. to fill up the above stated vacancies are stated
below:
o Promotion: It boosts the morale of not only the employee who is promoted but
also of other employees as they get an assurance that their competence will
also be recognised in due course.
o Placement Agencies and Management Consultants provide specialised services
to the organisations to recruit technical, professional and managerial personnel
at middle and top level.
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o Casual Callers as a source of recruitment reduces the cost of recruiting
workforce in comparison to other sources.
Question :8
Zenith Ltd. is a highly reputed company and many people wanted to join this
company. The employees of this organisation are very happy and they discuss how
they came in contact with this organisation.
Aman said that he was introduced by the present Sales Manager, Mr. John.
Benu said that he had applied through the newspaper and was appointed as the
H.R. Manager.Vaibhav said that he was neither related to any employee of the
organisation nor was there any advertisement in the newspaper, even then, he
was directly called from IIM Ahmedabad from where he was about to complete his
MBA.
The above discussion is indicating an important function of management. Name
the function of management.
The management function identified in part (1) follows a particular process.
Explain the step of this process which is being discussed in the above paragraph.
Answer:
 The function of management being referred to in the above lines is ‘Staffing’.
 Recruitment is the step in the staffing process which is being discussed in the
above paragraph. Recruitment may be defined as the process of searching for
organisation.
 The various sources of recruitment mentioned in the above paragraph are:
 Aman: Recommendation of present employee.
 Benu: Advertisement in newspaper Vaibhav: Campus recruitment.
Question :9
Blue Heavens Ltd. purchased a new machinery from Germany for manufacturing
some auto components. It was a cost-effective and quality production machine but
during the production process, manager observed that the quality of the
production was not as per standards. On investigation, it was found that there was
lack of knowledge of using these hi-tech machines. So, frequent visits by engineers
were required from Germany but this resulted in high overhead charges.
Suggest what can be done to develop the skills and abilities of employees for
producing quality products by using these hi-tech machines. Also state how the
employees or the organisation will be benefited by your suggestion.
Answer:
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 Training should be provided to the employees to develop their skills and
abilities for producing quality products by using these hi-tech machines.
 The benefits of imparting training to the employee are as follows:
o Better career: Training leads to better career opportunities for the employees
as it helps to improve their skills and knowledge of doing the job.
o Increased earnings: Training leads to increased performance by the employees
thereby helping them to earn more.
o Increased efficiency: Training makes the employees more efficient in handling
machines and less prone to accidents.
o Improved motivation: Training increases the satisfaction and morale of
employees thereby motivating them to work with greater enthusiasm.
Question :10
The workers of Gargya Ltd. are unable to work on new computerised machines
imported by the company to fulfill the increased demand. Therefore, the workers
are seeking extra
guidance from the supervisor and the supervisor is overburdened with frequent
calls of the workers.
Suggest how the supervisor, by increasing the skills and knowledge of workers, can
make them handle their work independently.
Also state any three benefits that the workers will derive by the decision of the
supervisor.
Answer:
 The supervisor may provide Vestibule training to the workers in order to
enable them handle their work independently.
 Vestibule training is a popular method for providing off the job training during
which the trainees learn their jobs on the equipment they will be using at their
actual work place. This is usually done when employees are required to handle
sophisticated machinery and equipment.
 The benefits of imparting training to the employee are as follows:
o Better career: Training leads to better career opportunities for the employees
as it helps to improve their skills and knowledge of doing the job.
o Increased earnings: Training leads to increased performance by the employees
thereby helps them to earn more.
o Increased efficiency: Training makes the employees more efficient in handling
machines and less prone to accidents.
Question :11
150
Mohit Gupta is working with Yellow Security Services Ltd. He is also recruiting
security guards for the company. The company provides security services in Delhi
and Noida at short notice to various companies. The guards are recruited on a
temporary basis. The guards provided by this company are known for their honesty
and punctuality. Mohit Gupta is well-known in his village for providing
employment to unskilled people.
Name the source of recruitment used by Yellow Security Services Ltd.
State any one disadvantage of this source of recruitment.
Identify the need of security guards which is being fulfilled by the company as per
Maslow’s need hierarchy.
Identify any two values communicated to society in the above stated case.
Answer:
 External source of recruitment i.e. Labour contractor has been used by Yellow
Security Services Ltd.
 One disadvantage of the external source of recruitment is that the new
employees may take longer time to settle in the organisation.
 The basic physiological needs of the security guards are being fulfilled by the
company.
 The two values that are being communicated to the society are
o Reliability /Dependability
o Generating employment opportunities
Question :12
Prashant, the Director of a company, is planning to manufacture rugs for utilising
waste materials from one of his garment factories. He decided that this
manufacturing unit will be set-up in a rural area so that people of that area will
have more job opportunities. For this, he wanted four different heads for Sales,
Accounts, Purchase and Production Departments. He decided that one of them will
be a differently abled person, another from a minority community and one from a
disadvantaged section of society. He gave an advertisement in the newspaper for
the above vacancies.
Identify and state the next three steps Prashant has to follow in the staffing
process after advertising for the above vacancies.
Identify any two values that Prashant wants to communicate by setting up this
manufacturing unit.
Answer:
 The next three steps to be followed by Prashant in the staffing process after
advertising for the above vacancies are as follows:
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o Selection: Selection is the process of choosing the best candidate from a pool
of applicants.
o Placement and Orientation: Placement refers to the process of giving the
charge of the job for which they have been appointed. Orientation may involve
a series of activities related to introducing the new employee to other
employees and familiarising him with the rules and policies of the organisation.
Moreover, he is taken around the workplace and made aware of the fire safety
policy, canteen, conference room etc.
o Training and Development: Organisations either have in-house training centres
or make alliances with training and educational institutes. This is done to
ensure continuous learning of their employees in order to strengthen their
competencies for both present and future jobs. This helps to motivate them
and enables them to perform better and contribute more towards the
realisation of the organizational effectiveness and efficiency.
 The two values that Prashant wants to communicate by setting up this
manufacturing unit are:
o Optimum utilisation of resources
o Rural development.
Question :13
Nishant, the director of a garment company, is planning to manufacture bags for
the utilisation of waste material from one of his garment’s unit. He has decided
that his manufacturing unit will set-up in a rural area of Odisha where people have
very few job opportunities and labour is available at very low rates. He also
thought of giving equal opportunities to men and women.
For this, he wanted four different heads for sales, accounts, purchase and
production. He gave an advertisement and short listed ten candidates per post
after conducting different selection tests.
Identify and state the next three steps for choosing the best candidate out of the
short¬listed candidates.
Also identify two values which Nishant wants to communicate to society by setting
up this manufacturing unit.
Answer:
 The next three steps to be followed by Nishant in the selection process after
giving an advertising and short listing ten candidates per post after conducting
different selection tests are as follows:
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o Employment Interview: It is a face-to-face interaction between the
interviewers and prospective candidate. It involves a formal, in-depth
conversation that is conducted to evaluate the applicant’s suitability for the
job.
o Reference and Background Checks: At the time of filling up of the job
application form,the prospective candidates are required to provide names,
addresses, and telephone numbers of references for the purpose of verifying
information and gaining additional information about him/her.
o Selection Decision: The final decision about the selection is made from among
the candidates who pass the tests and interview.
 The two values that Nishant wants to communicate to the society by setting up
this manufacturing unit are:
o Rural development.
o Gender equality
Question :14
Harish, the director of a company, is planning to manufacture stuffed toys for
utilising waste materials from one of his garment factories. He decided that this
manufacturing unit will be set-up in a rural area so that people of that area will
have more job opportunities. For this, he selected Rehman, Anita Banerjee,
Harpreet Kaur and Umesh (a differently abled but very intelligent and creative
person in designing) as the heads of Sales, Accounts, Purchase and Production
Departments respectively.
Identify and state the next three steps that Harish has to follow in the staffing
process after selecting the heads of different departments.
Identify any two values that Harish wants to communicate by setting-up this
manufacturing unit.
Answer:
 The next three steps that Harish has to follow in the staffing process after
selecting the heads of different departments are as follows:
ensure continuing learning of their employees and in order to strengthen their
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competencies for both present and future jobs. This helps to motivate them
and enables them to perform better and contribute more towards the
realisation of the organizational effectiveness and efficiency.
o Performance Appraisal: It is a process of evaluating the worth of an employee
to the organisation. It may be done in both formal and informal way. The
process performance appraisal includes defining the job, appraising
performance and providing feedback.
 The two values that Harish wants to communicate to the society by setting up
o Rural development
Question :15
Sahil, the director of a garments company, is planning to manufacture bags for the
utilisation of waste materials from one of his garment’s units. He decided that his
manufacturing unit will be set up in the rural area of Odisha where people have
very less job opportunities and labour is available at a very low rate. He also
thought of giving equal opportunities to men and women.
For this, he selected S. Chatterjee, Inderjeet Kaur, Aslam and Sarabjeet as heads of
the Sales, Accounts, Purchase and Production Departments.
Identify and state the next two steps that Sahil has to follow in the staffing process
after selecting the above heads.
Also identify two values which Sahil wants to communicate to society by setting up
this manufacturing unit.
Answer:
 The next two steps that Sahil has to follow in the staffing process after
selecting the above heads are:
a series of activities related to introducing the new employee To other
ensure con¬tinuous learning of their employees and in order to strengthen
their competencies for both present and future jobs. This helps to motivate
them and enables them to perform better and contribute more towards the
realisation of the organisational effectiveness and efficiency.
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 The two values that Sahil wants to communicate to the society by setting up
o Gender equality
Question :16
Owing to the increased workload after demonetisation, the income tax employees
of Karnataka and Goa region had urged the centre to increase manpower of the I-T
department by filling up 35% vacancies which were lying vaccant. As there were
confirmed reports about misuse of bank accounts, foreign exchange mechanism,
gold purchases and adoption of various other dubious means for investing the
unaccounted cash.
Identify and explain the function of management being discussed in the above
lines.
Identify and explain the particular step related to the function of management as
identified in part (1) of the question which has already been performed. Also, state
the next three steps to be performed after this step.
Answer:
 Staffing is the function of management which is being referred to in the above
lines. The managerial function of staffing is concerned with obtaining and
maintaining a satisfactory and satisfied workforce.
 The step in the process of staffing which has already been carried out is
Estimating manpower requirements.
 Estimating the Manpower Requirements: It is the first step in the staffing
process and is carried out with the help of workload analysis (assessment of
the number and types of human resources necessary for the performance of
 The next three steps to be performed after estimating manpower
requirements are described below:
organisation.
o Selection: Selection is the process of choosing the best candidate from the pool
of applicants.
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policy , canteen, conference room etc.
Question :17
Sia plans to start a play school at a prime location in the city. She offers a
partnership proposal to her family friend Jyotika who has done a diploma in human
resource management. As Sia understands that human resource management is
critical to starting and running the school. The school needs an experienced and
dynamic principal. It also needs talented and dedicated teachers and a competent
administrative staff. Therefore, after determining the organisational structure of
the school she initiates the staffing process with the help of Jyotika to fill in the
various job positions as staffing is considered to be an inherent part of human
resource management.
Outline the concept of human resource management.
Why is staffing is considered to be an inherent part of human resource
management?
Answer:
 Human Resource Management refers to the process of managing the
employees within an organisation as human factor is recognised as the most
important instrument of success in an organisation. Therefore, it is a
specialised activity which may require the expertise of many people depending
upon the nature and size of the business.
 Staffing is considered to be an inherent part of human resource management
as it deals with the human element of management and is concerned with
obtaining, utilising and maintaining a satisfactory and satisfied work force.
Question :18
Nakul belongs to a small village in Varanasi. Being the only literate person in his
immediate family, he decides to settle in a city. So he opens a sweets shop in
Chandni Chowk, Delhi as he possesses extraordinary culinary skills. Very soon he
starts getting requests from his cousins in the village to engage them in some kind
of job in his business. Considering it to be his moral obligation, he engages five of
his cousins in his business without paying any specific attention to their individual
capabilities. This leads to wastage of materials, time, effort and energy, resulting in
lower productivity and poor quality of products. As a result, the profitability of his
business starts falling. Soon, he realized that for the success of the business it is
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essential that right kind of people must be available in right number at the right
time.
Identify and explain the function of management that has been overlooked by
Nakul.
Describe briefly the importance of the function of management as identified in
part (1).
Answer:
 Staffing is the function of management that has been overlooked by Nakul.
 Staffing is the process of manning the roles designed into the organisational
structure. It is concerned with obtaining, utilising and maintaining a
satisfactory and satisfied work force. –
 The importance of the staffing function of management is described below:
o It helps in discovering and obtaining competent personnel for various jobs
within an organisation.
o By putting right person on the right job, it leads to a higher performance of the
employees.
o It ensures the continuous survival and growth of the enterprise through the
succession planning for managers.
o It helps to ensure optimum utilisation of the human resources. By avoiding
over manning, it prevents under-utilisation of personnel and high labour costs.
At the same time it avoids disruption of work by indicating in advance the
shortages of personnel.
o It improves job satisfaction and morale of the employees through objective
assessment and fair rewarding for their contribution.
Question :19
Anuroop runs a law firm in Hyderabad. His firm offers valuable financial and legal
consultancy services to the clients. Whenever the firm hires any new employees,
on the first day of their joining, they are welcomed to the organisation and are
given details about hours of work, holiday requests, sickness procedure, dress
code, lunch arrangements, introduced to the daily operations and key people in
the workplace, etc. They are also familiarised with the organisation’s policies and
procedures, including complaints and dispute resolution, sexual harassment,
emergency exits and evacuation procedure.
Name the type of training which is being referred to in the above lines.
Identify and explain the human needs of the new employees that are being fulfilled
by Anuroop through this training.
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Answer:
 Induction training is being referred to in the above lines.
 The various types of human needs of the new employees that are being
fulfilled by Anuroop through induction, training are stated below:
o Basic Physiological Needs: These needs are most basic in the hierarchy and are
linked to primary needs like hunger, thirst, shelter etc. “they are given details
about hours of work, holiday requests, sickness procedure, dress code, lunch
arrangements etc.”
o Safety/Security Needs: These needs offer security and protection from physical
and emotional harm. “They are also familiar with the organisation’s policies
and procedures, including complaints and dispute resolution, sexual
harassment, emergency exits and evacuation procedure.”
o Affiliation/Belonging Needs: These needs refer to affection, sense of
belongingness, acceptance and friendship. “Whenever the firm hires any new
employees, on the first day of their joining, they are welcomed to the
organisation.”
Question :20
Deeksha is the general manager of a firm offering Telemarketing services.
Telemarketing is a method of direct marketing in which a representative of the
company solicits prospective customers to buy products or services, either over
the phone or through a subsequent face to face, or Web conferencing
appointment scheduled during the call. Deeksha ensures that all the call centre
representatives are well versed with the local languages so that they can interact
effectively with the prospective buyers. Moreover, the employees are provided
training to improve upon their troubleshooting skills so that they do not spend too
much time with every customer. By acquiring these skills the callers are able to add
value to their message and also shorten the call durations, leading to increased
customer satisfaction and profitability of the business.
As a part of the firm’s policy, Deeksha encourages women, persons from backward
communities and persons with special abilities to assume responsible positions in
the organisation.
Identify the type of communication barriers that Deeksha is able to overcome by
ensuring that all the call centre representatives are well versed with the local
languages.
What are benefits of training employees to an organisation?
List any two values that the firm wants to communicate to the society.
Answer:
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 Deeksha is able to overcome the semantic barriers by ensuring that all the call
centre representatives are well versed with the local languages.
 The benefits of training to an organisation are as follows:
o Training imparts systematic learning to employees thereby helping to avoid
wastage of efforts and money. It is considered better than the hit and trial
methods.
o It increases the employees’ productivity both in terms of quantity and quality,
leading to higher profits.
o Training increases the morale of the employees and reduces absenteeism and
employee turnover.
 The two values that the firm wants to communicate to the society are:
o Women empowerment
o Humanity.
Question :21
Srija runs an NGO under the name ‘Sarthak’ in Delhi. The organisation is engaged
in offering wastepaper recycling services to all kinds of institutions in the Delhi NCR
region. It also manufactures custom made paper stationery out of recycled paper
on order for the interested institutions at a very competitive price. The website of
‘Sarthak’ provides a link to a Careers site wherein the people desirous of joining
the NGO can use simple Job Search to find the right opportunity for themselves.
The NGO also keeps a database of unsolicited applicants in its office so that job
seekers may be notified of future opportunities when they arise.
Identify the two sources of external recruitment being used by the NGO ‘Sarthak’
List any two values that Srija wants to communicate to the society.
Answer:
 The two sources of external recruitment being used by the NGO ‘Sarthak’ are
as follows:
o Web Publishing:”The website of ‘Sarthak’ provides a link to a Careers site
wherein the people desirous of joining the NGO can use simple Job Search to
find the right opportunity for themselves”
o Casual Callers: “The NGO also keeps a database of unsolicited applicants in its
office so that job seekers may be notified of future opportunities when they
arise.”
 The two values that Srija wants to communicate to the society are:
o Environment sustainability.
o Responsibility.
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Question :22
Race Tech Ltd. is one of the top IT companies in India. The company does mass
recruitment each year from different colleges offering fresher level job to the final
year students. This helps in recruiting the brightest and the best available talent in
the educational institutions.
Identify the source of external recruitment adopted by the company.
Explain briefly any three advantages of using the external sources of recruitment.
Answer:
 Campus Recruitment is the source of external recruitment adopted by the
company.
 The advantages of using the external sources of recruitment are stated below:
o Qualified Personnel: Through the external sources of recruitment,the
management is able to attract qualified and trained people to apply for the
vacant job positions in the ^manisation.
o Wider Choice: As the vacancies are advertised widely a large number of
applicants from outside the organisation are likely to apply. This gives the
organisation a wider choice while selecting the people for employment.
o Fresh Talent: The organisations cannot fulfil all the vacancies from within the
organisation. Therefore by using the sources of external recruitment they get a
wider choice and it brings new blood into the organisation.
Question :23
Prateek has started an advertising agency in Gurgaon. One of the page on his
company’s website contains the following information, “Welcome to all the visitors
of this page who are looking for an opportunity to make a career in the field of
advertising. The openings are available in the company at various levels, so don’t
miss the chance.” This page includes a link to provide further details about the
vacancies available in terms of the desired qualifications, experience, personality
characteristics and so on. Through a continuous assessment of the number and
types of human resources necessary for the performance of various jobs and
accomplishment of organisational objectives and in relation to the number and
type available, he gets the information on this page updated.
Identify and explain the steps in the staffing process being carried out by Prateek
Name the concept that relates to the details about the vacancies available in terms
of the desired qualifications, experience, personality characteristics and so on.
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Answer:
 The two steps in the staffing process being carried out by Prateek are as
follows:
o Estimating the Manpower Requirements: It is the first step in the staffing
process and is carried out with the help of workload analysis (assessment of
the number and types of human resources necessary for the performance of
“Through a continuous assessment of the number and types of human
resources necessary for the performance of various jobs and accomplishment
of organisational objectives and in relation to the number and type available.”
organisation.
 “One of the pages on his company’s website contains the following
information, “Welcome to all the visitors of this page who are looking for an
opportunity to make a career in the field of advertising. The openings are
available in the company at various levels, so don’t miss the chance.”This page
includes a link to provide further details about the vacancies available.”
“..he gets the information on this page updated.”
 Job description is the concept that relates to the details about the vacancies
available in terms of the desired qualifications, experience, personality
characteristics and so on.
Question :24
Sunidhi runs a KPO (Knowledge Process Outsourcing) in Gurgaon. The services
provided by her firm include all kinds of research and information gathering in
fields such as financial market, medicine, animation and design, etc. Sunidhi
believes that the success of the company can be achieved mainly through the
people it chooses to employ. Therefore, she aims to attract the best people and
provides them innumerable opportunities to enhance their knowledge and skill
relevant to their position.
In context of the above case, identify and explain the aspects of staffing being
taken into consideration by Sunidhi by quoting lines from the paragraph.
Answer:
 The three aspects of staffing being taken into consideration by Sunidhi are as
follows:
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 Recruitment: Recruitment may be defined as the process of searching for
organisation.“she aims to attract the best people”
 Selection: Selection is the process of choosing the best candidate from a pool
of applicants.
“Sunidhi believes that the success of the company can be achieved mainly
through the people it chooses to employ.
 ”Training: Training helps to upgrade the knowledge and skills of the employees
so that their ability to perform in the present job can be enhanced.
“..provides them innumerable opportunities to enhance their knowledge and
skill relevant to their position.”
Question :25
Anushka is doing a course in fashion designing from an institute of repute. As a
part of the course, she has been asked to take on-the-job training in an export
house for a fortnight in order to gain an insight about various practical aspects
related to designing. Anushka, through the references from her senior, joins an
export house owned by an upcoming designer, Nandita.
Name and explain the type of training which Anushka has been asked to
undertake.
Explain briefly any one method for providing off-the-job training.
Answer:
 Internship Training is the type of training which Anushka has been asked to
undertake. It is a joint programme of training in which educational institutions
and business firms co-operate. The learners carry on with their regular studies
for the prescribed period. They also work in some factory or office to acquire
practical knowledge and skills related to their specific field of expertise.
 Vestibule training is a popular method for providing off-the-job training. The
term ‘vestibule’ means duplicate or replica. Under this method, the trainees
learn their jobs on the equipment they will be using at their actual workplace.
The training is conducted away from the actual work floor at a place where
actual work environments are created in a classroom and employees use the
same materials, files and equipment. This is usually done when employees are
required to handle sophisticated machinery and equipment.
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Question :26
The employees of ‘Food Darbar,’ a restaurant, are trained through a structured
programme that provides training in each area within the restaurant. The trainees
learn the skills necessary for running each of the 12 workstations in the restaurant,
from taking orders to the cooking area. This enables the employees to gain a
broader understanding of all parts of the business and how the restaurant
functions as a whole. The trainee gets fully involved in the department’s
operations and also gets a chance to test her own aptitude and ability. When
employees are trained by this method, the organisation finds it easier at the time
of promotions, replacements or transfers.
Name the type of training which ‘Food Darbar’ provides to its employees.
Answer:
 Job rotation is the type of training which ‘Food Darbar’ provided to its
employees. It is a method of on-the-job training .
Question :27
Sunder Lai runs a security service providers agency. Considering that psychological
testing is a critical step for judging the potential of the prospective candidates for a
career in law enforcement, he uses various types of psychological tests as part of
the selection processes. This is done to ensure that potential new officers are
emotionally and psychologically suited to carry out the requirements of the job.
Briefly outline any one more type of test that Sunder Lai may use to assess the
potential of the prospective candidates.
Briefly outline the steps involved in the selection process after conducting the
assessment tests.
Answer:
 Interest Tests: Interest tests are used to know the pattern of interests or
involvement of a person.
 The further important steps in the process of selection, after conducting
assessment tests are as follows:
o Employment Interview: It is a face-to-face interaction between the
interviewers and prospective candidate. It involves a formal, in-depth
conversation that is conducted to evaluate the applicant’s suitability for the
job.
o Reference and Background Checks: At the time of filling up of the job
application form, the prospective candidates are required to provide names,
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addresses, and telephone numbers of references for the purpose of verifying
information and gaining additional information about him/her.
o Selection Decision: The final decision about the selection is made from among
the candidates who pass the tests and interview.
o Medical Examination: After the selection decision and before the job offer is
made, the candidate is required to undergo a medical fitness test.
o Job Offer: The next step in the selection process is job offer, given to those
applicants who have passed all the previous tests.
o Contract of Employment: After candidate accepts the job offer, a contract of
employment is issued. Basic information that should be included in a written
contract of employment will vary according to the level of the job, but it will
include information like job title, duties, responsibilities, date of joining, pay
and allowances, etc .
Question :28
In a leading manufacturing company there was a meeting regarding the
importance of a function of management which was very much required in
meeting the growing needs of good employees and solving complicated issues
related with human behavior at the workplace. They also discussed about the most
important resource of an organisation. Which function of management is indicated
here in the above case? Give one advantage of this function.
Which most important resource of an organisation is indicated here?
Answer:
 The function of management which is indicated here is Staffing.
 One advantage of staffing is:
Staffing helps in obtaining competent personnel for the organisation.
The most important resource of an organisation indicated here is ‘Human
Resource’.
Question :29
Alpha Enterprises is a company manufacturing water geysers. The company has a
functional structure with four main functions— Production, Marketing, Finance
and Human Resource. As the demand for the product grew, the company decided
to hire more employees.
Identify the concept which will help the Human Resource Manager in deciding the
actual number of persons required in each department.
Answer:
 Concept: Workload Analysis.
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Question :30
Bhagwati Enterprises is a company engaged in the marketing of air- conditioners of
a famous brand. The company has a functional structure with four main functions
— Purchase, Sales, Finance and Staffing. As the demand for the product grew, the
company decided to recruit more employees.
Identify the concept which will help the Human Resource Manager to find out the
number and type of personnel available so that he could decide and recruit the
required number of persons for each department.
Answer:
 Workforce Analysis.
Question :31
Pluto Utensils is a very old manufacturing company. Recently it was found by the
management that the employees who were working in the organisation were
lethargic with limited skills. The management compared its organisation with that
of others and found a huge difference. When a proper analysis of job positions and
their occupants was done it was found that many of them were not working at
places suitable to them. This increased the worry of the management. The
organisation had already spent five decades in the industry and was worried about
the successful continuation of business which required capable future managers
but the current employees were not much capable. The company had recently
suffered huge losses. It was running out of budget. To add to its problems the
number of employees was more than required so the company had to bear
additional cost. It is said that one bad thing leads to another. This came true for
the company when there was some negative reporting about its HR practices in a
daily newspaper where it was mentioned that the employees were not satisfied
and suffered with low morale. The scene forty years back was different when the
company used to be the number one brand in its segment.
Which function of management doesn’t seem to be working well for the company
in the above case? 1
Identify the different benefits, associated with the proper utilisation of this
function, the company would have enjoyed if everything had worked in its favour.
Answer:
 The function of management which doesn’t seem to be working well for the
organisation is
 ‘Staffing’.
 The benefits of staffing highlighted above are:
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o Competent Personnel. Recently it was found by the management that the
employees who were working in the organisation were lethargic with limited
skills.
o Right person for right job. When a proper analysis of job positions and their
occupants was done it was found that many of them were not working at
places suitable to them.
o Succession Planning. The organisation had already spent five decades in the
industry and was worried about the successful continuation of business which
required able future managers but the current employees were not much
capable.
o Optimum utilisation of human resources. To add to its problems the number of
employees were more than required, so the company had to bear additional
cost.
o Improves job satisfaction and morale of the employees. This came true for the
company when there was some negative reporting about its HR practices in a
daily newspaper where it was mentioned that the employees were not
satisfied and suffered with low morale.
Question :32
‘Seven Colours’ is a progressive company with a very good HR record. Recently it
created a pool of prospective candidates for jobs to be given in various
departments. The company is always willing to complete its HR duties properly.
Various job positions exist in the company. The company makes it compulsory for
the HR department to prepare job descriptions so that necessary information about
the jobs could be created. For its decent HR practices the company has won several
awards. It knows that the most important asset of an organisation is its image and
to protect it the company should always be ready to do extra efforts. Last year
when a few groups filed a complaint against the company it made great efforts to
fight legally and came out victorious. It has a very good set up to promote the
interests of the employees. In order to give them a familiar environment the
company promotes various informal organisations and proper celebration of all
festivals. It is very responsive towards its workers and always attends to their
problems. There is a special cell in the HR department which is very responsive to
the complaints made by the employees regardless of the level at which they work.
Recently a national newspaper made a very favourite mentioning of the absence of
strikes in the company as the management-labour relations are very good and a lot
of importance is given to the demands of the labour unions. A very peaceful
environment exists in the organisation.
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In the above case there are highlighted various duties of the HR department.
Identify them.
Answer:
 The various duties of the HR department highlighted above are:
o Recruitment is done in order to create the pool of candidates who can then be
made to go through the process of selection. Recently it created a pool of
prospective candidates for jobs to be given in various departments.
o Analysing jobs and preparing job descriptions. The Company makes it
compulsory for the HR department to prepare job descriptions so that
necessary information about the jobs could be created.
o Defending the company in case any law suit is filed against the company. Last
year when a few groups filed a complaint against the company it made great
efforts to fight legally and came out victorious.
o Helps in fulfilling social needs thus providing welfare and social security. In
order to give them a familiar environment the company promotes various
informal organisation and proper celebration of all festivals.
o Handles grievances of the employees and makes timely attention to the
complaints made by them. There is a special cell in the HR department which is
very responsive to the complaints made by the employees regardless of the
level at which they work.
o Maintaining proper relations between labour and management. Recently a
national newspaper made a very favourite mentioning of the lack of strikes in
the company as the management-labour relations are very good and a lot of
importance is given to the demands of the labour unions.
Question :33
Mr. Naresh recently completed his M.B.A. from one of the Indian Institutes of
Management in Human Resource Management. He has been appointed as Human
Resource Manager in a Truck Manufacturing Company. The company has 1,500
employees and has an expansion plan in hand that may require additional 500
persons for various types of jobs. Mr. Naresh has been given the complete charge of
the company’s Human Resource Department.
List out the specialised activities that Mr. Naresh is supposed to perform as the
Human Resource Manager of the company.
Answer:
 Being Human Resource Manager of the company Mr. Naresh is supposed to
perform the following specialised activities:
o Recruitment
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o Job analysis, collecting information about jobs in order to prepare job
description.
o Developing compensation and incentive plans.
o Making arrangements for training and development of employees.
o Maintaining good relations with labour unions.
o Handling grievances and complaints.
o Taking care of social security and welfare of employees.
o Protecting the company against law suits, and avoiding legal complications.
Question :34
Aditya Rubbers is thinking of knowing the worth of its employees but it is unable to
do so yet. The firm now has decided to include a step in its staffing process through
which it can judge the performance of its employees.
Name the step the organisation will include.
Name two more other steps in the staffing process which precede this step.
Answer:
 The step discussed here is ‘Performance Appraisal’.
 The following two steps in the process of staffing are:
o Placement and Orientation.
o Training and Development.
Question :35
Company A requires new employees. For this the company has started making
efforts. The financial condition of the company is not very good but the
requirement of employees at key positions is required.
Company B doesn’t want too much complication in the process of selection and
placement. It wants to keep the process simple. The targets of production are
already very demanding for the top management. They want a way where their
least efforts are required to form the required taskforce to be involved for special
projects.
Company C is struggling with lack of balance in the composition of its workforce.
There are certain departments in which the number of employees is surplus
whereas there are certain departments in which there is shortage of required
number of employees.
How can Company A solve its problem? 1
Which type of recruitment will be good for Company B?
What do you think could be the solution for Company C?
Answer:
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 The Company A can solve its problem by going for Internal Recruitment as in
this way the process of selection and placement will be simplified. The
candidates who are already part of the organisation can be more easily judged
and evaluated. The reliability component will also be high in this type of
recruitment.
 The Company B should go for Internal Recruitment. This mode of recruitment
will be cheaper and the Company can thus save money which is required more
in case of external recruitment.
 The Company C should opt for Internal Recruitment as employees can be
transferred from surplus areas to areas where there is shortage of employees.
So an optimum balance can be achieved within the departments.
 The concept of management which is highlighted in the above case is ‘Merits of
Internal Recruitment’.
Question :36
In ‘Amazing Kids’ which is a school of reputation the ^principal has decided to
improve the performance of teachers through proper motivation. He has planned
to promote some of the good performing teachers to the post of supervisors in
their respective wings. The adjoining school after knowing this decides to do the
same but the school is new and there is no scope of filling the higher slots with the
teachers of the school as all of them are new too.
This school then goes for external sources of recruitment for which two sources are
checked:
They approach a government office for this purpose. Here in this government
agency link between job seekers and employers is matched and people who are
unemployed get registered for skilled as well as unskilled jobs.
They check the data of people who applied for the jobs of teachers but were unable
to 98 44 Business Studies—Case Studies Tapan Pathak
make it. There was a chance that these people could be easily recruited since they
were interested in the jobs last year.
A friend of the principal of ‘Amazing Kids’ is a factory owner. He told him that
finding workers for his factory is easy as he generally requires unskilled labour. Daily
notification is put outside the factory building and people apply and get selected on
spot.
In the above case which type of recruitment is attempted by the principal of
‘Amazing Kids’?
Which limitation is discussed in the last part of first paragraph of the case?
Identify the two external sources of recruitment involved by the second school in
the above case.
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Answer:
 In ‘Amazing Kids’ which is a school of reputation the principal has decided to
improve the performance of teachers through proper motivation. He has
planned to promote some of the good performing teachers to the post of
supervisors in their respective wings.
 Internal source of recruitment. He has planned to promote some of the good
performing teachers to the post of supervisors in their respective wings.
 The adjoining school after knowing this decides to do the same but the
problem with them is that the school is new and there is no scope of filling the
higher slots with the teachers of the school as all of them are new too.
 Limitation of internal recruitment. The school is new and there is no scope of
filling the higher slots with the teachers of the school as all of them are new
too.
 This school then goes for external sources of recruitment for which two
sources are checked:
 They approach a government office for this purpose. Here in this government
agency link between job seekers and employers is matched and people who
are unemployed get registered for skilled as well as unskilled jobs.
 They check the data of people who applied for the jobs of teachers but were
unable to make it. There was a chance that these people could be easily
recruited since they were interested in the jobs last year.
 The two external sources of recruitment used by the second school are:
o Employment exchange. This government agency creates a link between job
seekers and employers. People who are unemployed get registered for skilled
as well as unskilled jobs.
o Casual callers. Since they were interested in the jobs last year but were unable
to make it.A friend of the principal of ‘Amazing Kids’ is a factory owner. He told
him that finding people for jobs is easy for his factory is easy as he generally
requires unskilled labour. Daily notification is put outside the factory building
and people apply and get selected on spot.
o Direct recruitment. As he generally requires unskilled labour. Daily notification
is put outside the factory building and people apply and get selected on the
spot.
Question :37
Anjana chemicals is looking for qualified and talented people to apply for vacant
jobs in the organisation. With the passage of time the organisation has learned a lot
with its experience. It knows when it goes for final selection of candidates, if will
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have to design different tests. They want to test the employees on the basis of their
learning and decision making ability. The company wants to ensure proper testing
of the recruited candidates. After this the candidates will be judged on the basis of
in-depth formal conversation.
After the selection the candidates are placed and trained. Employees have to be
trained on the equipment they will be using but this training will take place away
from the workplace.
Which type of recruitment should the company depend upon?
Which type of test should be conducted done by the organisation to suit their
need?
Which stage in the selection process is highlighted after the written test?
What type of training is given to the candidates?
Answer:
 The company should depend upon external recruitment to meet its needs.
Anjana chemicals is looking for qualified and talented people to apply for
vacant jobs in the organisation.
 The type of test needed by the organisation to suit their need is intelligence
test. They want to test the employees on the basis of their learning and
decision-making ability.
 The stage in the selection process which is highlighted after the written test is
employee interview. After this a stage in the selection process will come when
the candidates will be judged on the basis of in-depth formal Conversation.
 The type of training given to the candidates is vestibule training. Employees
have to be trained on the equipment they will be using but this training will
take place away from the workplace.
Question :38
Though the company XYZ has started its recruitment timely the process is
T1 ore it has decided to use internet for its help so that it can get qualified
personnels. The organisation knows that its challenges are not going to be over. It
decides to have different types of good quality tests at the stage of selection.
The three types of tests are:
Test A will involve measuring the ability of the employees to learn new skills. This
test can somehow foretell the ability of an individual to develop.
Test B will involve measuring the current existing skills of the employees. These
skills are the ones which are already possessed by the employees.
Test C will check the applicant’s reaction to emotions evaluating, value based and
maturity evaluating questions. However these tests are tough to be designed and
would pose challenge to the organisation.
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Which specific type of external recruitment is later adopted by the company?
Which one more benefit will occur with this new adoption?
Identify the different tests given in the above case.
Answer:
 In the above case:
The Company is doing external recruitment. Since the process is taking a lot of
time.
 The specific type of external recruitment which is adopted by the company is
web publishing. The Company then decides to use internet for its help.
 Since it is an external source of recruitment it will give a wider choice to the
organisation in terms of employees. A large number of people can apply as
large number of people will have access to the net.
 The three different tests given in the above case are:
o Test A is aptitude test. Measuring the potential of the employees to learn new
skills.
o Test B is trade test. Measuring the current existing skills of the employees.
o Test C is personality test. Checking the applicant’s reaction to emotions
evaluating, value based and maturity evaluating questions.
Question :39
Sharmila, a very able HR manager, is called by her boss. He tells her to judge
whether there is under manning or over manning in the organisation. She takes her
work sincerely and finds out that the total number of employees in the organisation
is less than required. Then she starts a process of searching potential employees for
the organisation. In her efforts to do so she adopts three ways:
She goes to various MBA colleges to find out new talent.
She talks to the existing employees for information about candidates in their know-
ledge who can be recruited in the organisation.
She asks for data base of the candidates who applied last year but could not make it
to the organisation.
Which type of analysis is done by Sharmila?
Which process is started by Sharmila to meet the problem of under manning?
Identify different types of sources of external recruitment highlighted in the above
case.
Answer:
 The type of analysis done by Sharmila is workforce analysis. Her boss tells her
to judge whether there is under manning or over manning in the organisation.
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 The process started by Sharmila to meet under manning is recruitment. She
then starts a process of searching potential employees for the organisation.
 The different types of sources of external recruitment highlighted in the above
case are:
o Campus recruitment. She goes to various MBA colleges to find out new talent.
o Employee recommendation. She talks to the existing employees for
information about candidates in their knowledge who can be recruited in the
organisation.
o Casual callers. She asks for data base of the candidates who applied last year
but could not make it to the organisation.
Question :40
Ashish, the Marketing Head, Raman, the Assistant Manager and Jyoti, the Human
Resource Manager of ‘Senor Enterprises Ltd/ decided to leave the company. The
Chief Executive Officer of the company called Jyoti, the Human Resource Manager
and requested her to fill up the vacancies before leaving the organization. Informing
that her subordinate Miss Alka Pandit was very competent and trustworthy, Jyoti
suggested that if she could be moved up in the hierarchy, she would do the needful.
The Chief Executive Officer agreed for the same. Miss Alka Pandit contacted ‘Keith
Recruiters’ who advertised for the post of marketing head for ‘Senor Enterprises
Ltd. They were able to recruit a suitable candidate for the company.
Raman’s vacancy was filled up by screening the database of unsolicited applications
lying in the office.
Name the internal/external sources of recruitment used by ‘Senor Enterprises Ltd.’
to fill up the above stated vacancies.
Also state any one merit of each of the above identified source of recruitment.
Answer:
 Sources of recruitment used by ‘Senor Enterprises Ltd.’:
 Promotion—for the post of Human Resource Manager
 Placement Agencies and Management
 Consultants—for the post of Marketing Head
 Casual Callers—for the post of Assistant Manager
 One merit of each source of recruitment:
o Promotion. Promotion of employees helps in improving their motivation,
loyalty and satisfaction level.
o Management Consultants. Management Consultancy firms help the
organization to recruit technical, professional and managerial personnel. They
recommend suitable names to their clients.
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o Casual Callers. Maintaining a database of unsolicited applicants in their offices
helps the organization in reducing the cost of recruiting workforce. It is the
cheapest source of recruitment.
Question :41
Radhika Garments Ltd. are the manufacturers of ‘Ladies Designer Suits’ with their
own trademark. During the year 2013-14 the company employed 30 senior
technicians to work on machines imported from France for manufacturing of ‘Ladies
Designer Suits’. The technicians were employed on a probation of one year and
were put on their respective jobs after 10 days of on-the-job training. Because of
the faulty selection process, they could not perform well. Ten of them left the job
on their own and 12 had to be removed by the company during the probation
period. Now the company is in the process of selecting new technicians. Advice the
company about any three types of selection tests, describing each in about 20
words, that may be used for selecting the desired technicians.
Answer:
 Three types of selection tests:
o Intelligence tests. Such tests are designed to check the level of intelligence of
the candidates. It reflects the learning ability of an individual along with his
ability to make judgments and decisions.
o Aptitude test. Aptitude test is designed to measure the potential of an
individual for learning new skills. It reflects the candidate’s capacity to develop
in the future.
o Personality test. Such tests help in judging the overall personality of an
individual. These indicate about the person’s reactions to emotions, maturity
level and value system.
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Chapter 7 Directing
Question :1
Umang Gupta is the Managing Director of Denver Ltd. The company had
established a good name for itself and had been doing well. It was known for
timely completion of orders. The Production Manager, Ms. Kanta was efficiently
handling the processing of order and had a team of fourteen motivated employees
working under her. Everything was going on well. Unfortunately she met with an
accident. Umang knew that in the absence of Ms. Kanta, the company may not be
able to meet the deadlines. He also knew that not meeting the deadlines may lead
to customer dissatisfaction with the risk of loss of business and goodwill. So, he
had a meeting with his employees in which accurate the speedy processing of
orders was planned. Everybody agreed to work as team because the behaviour of
Umang Gupta was positive towards the employees of the organisation. Hence
everyone put in extra time and efforts and the targets were met on time. Not only
this, Umang visited Ms. Kanta and advised her to take sufficient rest.
Identify the leadership style of Umang Gupta and draw a diagram depicting the
style.
State any two values highlighted by the behaviour of Umang Gupta.
Answer:
 Democratic style of leadership is being adopted by Umang Gupta. In adjoining
diagram B, C, D, and E are the subordinates of A who is a leader. The two
values being highlighted by the behaviour of Umang Gupta are:
o Responsibility
o Participation
Question :2
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M/s Beta Ltd. deals in consumer goods. It employs 100 workers and 10 operative
managers who give guidance and support to the workers while operating the
machinery. The company has a policy of granting leave as per the requirement of
the workers. Workers 3 H 3 are generally granted leave on festivals and special
occasions. Recently on Puja festival, it received a big order. Workers are keen to
take Puja holidays while management is pressing hard for overtime. This matter
was placed before the Personnel Manager who called the meeting of operative
managers and workers to inform them about the changes in the incentive plan
which states payment of double wages for working overtime and triple wages for
working on holidays. Workers without any pressure voluntarily took limited
holidays and were able to increase their earning by working overtime and on
holidays. During Board of Directors meeting, Personnel Manager was asked to
update the management for achieving higher output, meeting timely supplies
without any confrontation with workers. Personnel Manager replied, “I just used a
carrot with no sticks approach”.
By quoting the lines from above paragraph state any two elements of directing.
Answer:
 The two elements of directing being discussed in the above paragraph are
outlined below:
o Supervision: Supervision is the process of overseeing the work of the
subordinates and giving instructions to ensure optimum utilisation of resources
and achievement of work targets.
Supervision-” it employs 10 operating managers support to the workers.”
o Motivation: Motivation is the process of stimulating people to action to
accomplish desired goals.
Motivation-“to pay double wages for working overtime and triple wages for
working on holidays”.
Question :3
Prateek is working in a multinational company in Noida. He was running a
temperature for the last many days. When his blood was tested, he was found to
be positive for malaria. He was admitted in a hospital and a blood transfusion was
advised by the doctors as his condition was very serious. One of his colleagues sent
a text message to his superior, Mr. B. Chatterjee. Mr. B. Chatterjee immediately
sent a text message to the employees of the organisation requesting them to
donate blood for Prateek. When the General Manager came to know about it, he
ordered for fumigation in the company premises and cleaning the surroundings.
From the above paragraph, quote lines that indicate formal and informal
communication.
176
State any two features of informal communication.
Identify any two values that are being communicated to society in the above case.
Answer:
 Informal communication: “One of his colleagues sent a text message to his
superior, Mr. B. Chatterjee. Mr. B. Chatterjee immediately sent a text message
to the employees of the organisation requesting them to donate blood for
Prateek.”
 Formal communication: “When the general manger came to know about it, he
ordered for fumigation in the company premises and cleaning surroundings.”
 The features of informal communication are as follows:
o The grapevine/ informal communication spreads very fast and sometimes gets
distorted.
o It is very difficult to detect the source of such communication.
 The two values that are being communicated to the society are:
o Humanity
o Cleanliness
Question :4
Mr. Shubhendu Bose is the owner of Bikmac Enterprises carrying on the business
of manufacturing various kinds of biscuits. There was a lot of discontentment in
the organisation and the targets were not being met. He asked his son, Naval, who
had recently completed his MBA, to find out the reason.
Naval found that all the decision-making of the enterprise were in the hands of his
father. His father didn’t believe in his employees. As a result, both the employer
and the employees were not able to understand each others’ messages in the
same sense. Thus, the employees were not happy and targets were not met.
Identify any two communication barriers because of which Bikmac Enterprises was
not able to achieve its target.
State one more barrier each of the types identified in (1) above. (CBSE, Delhi 2016)
Answer:
 The two communication barriers because of which Bikmac Enterprises was not
able to achieve its targets are:
 Organisational barriers: Organisational Policy
 If the organisational policy, is not supportive to free flow of communication, it
may hamper effectiveness of communications. Like in the above case Naval
found that all the decision making power of the organisation was highly
centralised as it was in hands of his father only.
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 Psychological barriers: Distrust Sometimes if there is lack of trust between the
parties, they cannot understand each other’s message in the same sense. Like
in the above case Naval found out that his father didn’t believe in his
employees.
o Organisational barriers:
o Status: Sometimes a status conscious manager also may not allow his
subordinates to express their feelings freely. This kind of an attitude may
create psychological distance between him and his subordinates.
o Psychological barriers: Premature evaluation: Sometimes people tend to
evaluate the meaning of message even before the sender completes his
message on the basis of their own judgement, experience etc.
Question :5
Mr. Fernandes is the owner of Unibie Enterprises, carrying on the business of
manufactur¬ing electrical appliances. There is a lot of discontentment in the
organisation and targets are not being met. He asked his son, Michel, who has
recently completed his MBA to find out the reason.
Michel found that all the decision-making of the enterprise were in the hands of
his father. Moreover, his father did not have confidence in the competency of the
employees. Thus, the employees were not happy.
Identify any two communication barriers because of which Unibie Enterprise was
not able to achieve its target.
State one more barrier each of the types identified in part (1) above.
Answer:
 The two communication barriers because of which Bikmac Enterprises was not
able to achieve its targets are:
 Organisational barriers: Organisational policy
 If the organisational policy, is not supportive to free flow of communication, it
may hamper effectiveness of communications. Like in the above case Michel
found that all the decision making power of the organisation was highly
centralised as it was in hands of his father only.
 Personal barriers:
Lack of confidence of superior in the subordinate: The personal factors of both
sender and receiver may exert influence on effective communication and they
may not be able to understand each other’s message in the same sense. Like in
the above case Michel found out that his father didn’t have confidence in the
competency of the employees.
 Organisational barriers:
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Status: Sometimes a status conscious manager also may not allow his
subordinates to express their feelings freely. This kind of an attitude may
create psychological distance between him and his subordinates.
 Personal barriers:
Pear of challenge to authority: If a superior may withhold or suppress the
communication that he may perceive is likely to have an adverse affect on his
authority.
Question :6
Alfa Ltd. was dealing in renewable energy services. To get the business, the team
leader and his team used to travel to different states to give presentations to the
clients. As per the policy of the company, the team leader used to travel by air
whereas his team travelled by road/train. It was not only time-consuming but also
forced the female team members to travel alone at times.
As a result, the subordinates were not acting in a desired manner to achieve the
organisational goals. The CEO of the company came to know about it. He called the
team leader, discussed the matter with him and decided to change the travel
policy of the company. It was decided that in future, all the members including the
leader would travel together and usefully utilise the travelling time in discussion
about the presentation to be given to the clients. This made a positive impact and
every member of the team started acting in a manner as desired by the team
leader.
State the features of the element of the function of management used by the
CEO.
Answer:
 The CEO Alfa Ltd. has used Motivation, which is an element of directing
function of management in order to deal with the situation effectively.
 The features of motivation are explained below:
o Motivation is an internal feeling: An urge, drives, or needs of human being,
which are internal, but likely to influence human behaviour.
o Motivation produces goal directed behaviour: A motivated employees is likely
to act in a desired manner and contribute effectively.
o Motivation can be either positive or negative: Positive motivation can be
provided through rewards like increase in pay, promotion, recognition etc.
Negative motivation involves use of negative means like punishment, stopping
increments, threatening etc. which also may prompt a person to act in the
desired way.
Question :7
179
Samita had been working as an assistant manager with Johnson Enterprises for the
last ten years. She was very popular amongst her colleagues because of her
commitment and dedication towards work. When the manager senior to her
retired, all her colleagues thought that now Samita would be promoted. But to
everyone’s surprise, the vacant post was filled by an outsider, Mrs. Rita. Samita felt
demoralised and her performance started declining. She would absent herself
often and could not meet her targets.
Mrs. Rita was a good leader who would not only instruct her subordinates but
would also guide and inspire them. She notices Samita’s behaviour and felt that
her performance could be improved. She started involving Samita in the decision-
making issues related to the organisation and made her a part of a high level joint-
management committee. Samita was now punctual in office and her performance
started improving.
Identify the function of management being performed by Mrs. Rita.
Name the element of the above function of management which helped Rita
improve Samita’s behaviour.
State any three features of the element identified in (2) above.
Answer:
 Mrs. Rita has performed the directing function of management.
 Mrs. Rita has been able to improve Samita’s behaviour with the help of
motivation which is an element of directing.
 The features of motivation are explained below:
o Motivation is an internal feeling: An urge, drives, or needs of human being,
which are internal, but are likely to influence human behaviour. Motivation
produces goal directed behaviour.
o Motivation can be either positive or negative: Positive motivation can be
provided through rewards like increase in pay, promotion, recognition etc.,
Negative motivation involves use of negative means like punishment, stopping
increments, threatening etc. which also may prompt a person to act in the
desired way.
Question :8
Jaideep recently joined as the Managing Director of Tivori Ltd., an apparel
designing company. He observed that the company had a number of experienced
fashion designers on its payroll. They regularly offered useful suggestions which
were neither appreciated nor rewarded by the company. Instead, the company
outsourced its services to some renowned fashion designers and paid them a good
compensation for their services. Because of this, the employees felt disheartened
and stopped giving useful suggestions.
180
Identify the communication barrier discussed above.
State the category of this communication barrier.
Explain any other communication barriers of the same category.
Answer:
 The communication barrier discussed in the above paragraph is Lack of proper
incentives
 It is a type of personal barrier.
 Some of the types of personal barriers are described below:
o Fear of challenge to authority: If a superior may withhold or suppress the
communication which he perceives is likely to adversely affect his authority..
o Lack of confidence of superior on his subordinates: A superior may not seek the
advice or opinions of their subordinates if he / she do not have confidence on
their competency.
o Unwillingness to communicate: Sometimes, subordinates may deliberately
with hold any communication with their superiors, if they perceive that it may
adversely affect their personal interests.
Question :9
Neeraj, a sales representative of Omida. Ltd. has changed seven jobs in the last
one year. He is a hardworking person but is not able to finalise deals with
customers due to his inadequate vocabulary and omission of needed words.
Sometimes, he uses wrong words because of which the intended meaning is not
conveyed. All this creates a misunderstanding between him and his clients.
Identify the communication barrier discussed above.
State the category of this communication barrier.
Explain any other communication barriers of the same category.
Answer:
 The communication barrier discussed above is badly expressed message.
 This kind of barrier falls in the category of semantic barriers.
 Semantic barriers are concerned with problems and obstructions in the process
of encoding and decoding of message into words or impressions. A few of
these are discussed below:
 Symbols with different meanings: Sometimes, a word may have several
meanings. The communication will be effective only if the receiver perceives it
in the same manner as intended by communicator.
 Faulty translations: Many a times it has been noted that if the translator is not
proficient with both the languages, mistakes may creep in causing different
meanings to the communication.
181
 Technical jargon: It is usually seen that specialists use technical jargon while
explaining something. If the persons with whom they are communicating are
not specialists in the concerned field, they may not be able to understand the
actual meaning of many such words.
 Body language and gesture decoding: While speaking, one may tend to move
his/her body in a certain manner. If there is no match between what is said and
what is expressed in body movements, communications may be wrongly
perceived by the receiver.
Question :10
Pramod was a supervisor at ‘Annapurna Aata’ factory. The factory was producing
200 quintals of aata every day. His job was to make sure that the work went on
smoothly and there was no interruption in production. He was a good leader who
would give orders only after consulting his subordinates and work-out the policies
with the acceptance of the group.
Identify and describe the leadership style being adopted by Pramod.
Answer:
 As a supervisor of ‘Annapurna Atta/ Pramod has adopted the democratic style
of leadership.
 Democratic leadership is also known as participative leadership. In this type of
leadership style, the members of the group take a more participative role in
the decision-making process.
 Everyone is given the opportunity to participate, ideas are exchanged freely,
and discussion is encouraged. It is one of the most effective style of leadership
and leads to higher productivity, better contributions from group members,
and increased group morale.
Question :11
Rahim was working in an enterprise on a daily wages basis. It was difficult for him
to fulfill the basic needs of his family. His daughter fell ill. He had no money for his
daughter’s treatment. To meet the expenses of her treatment, he participated in a
cycle race and won the prize money. The cycle company offered him a permanent
pensionable job which he happily accepted.
By quoting lines from the above paragraph, identify the needs of Rahim that are
satisfied by the offer of the cycle company.
Also, explain two other needs of Rahim followed by above that are still to be
satisfied.
Answer:
182
 The physiological needs and safety needs of Rahim are being satisfied by the
offer of the company.
 The other needs of Rahim followed by the physiological needs and safety needs
that still need to be satisfied are as follows:
belongingness, acceptance and friendship. The organisation, by encouraging
cooperative teamwork and by having accessible and kind superiors, can fulfill
these needs of its employees.
o Esteem Needs: These include factors such as self-respect, autonomy status,
recognition and attention. The organisation,by giving praise and recognition
when the employees do well, and offering promotions, can fulfill these needs
of its employees.
Question :12
Ankur is working as a production manager in an organisation. His subordinate,
Saurabh, discussed with him a method of production which will reduce the cost of
production. But due to some domestic problems and Ankur’s mind being pre-
occupied, he is not in a position to understand the message. Saurabh got
disappointed by this. Identify the factor which acts as communication barrier.
Explain three other factors of the same group of communication barriers.
Answer:
 Ankur is not in a position to understand the message due to lack of attention. It
is a type of psychological barrier. The preoccupied mind of the receiver leads to
non-listening of a message which acts as a major psychological barrier. Some of
the other psychological barriers are described below:
o Premature evaluation: Sometimes people tend to evaluate the meaning of a
message on the basis of their own judgement, experience etc., even before the
sender completes his message. This may lead to misinterpretation of the
message.
o Loss by transmission and poor retention: When communication passes through
various levels, successive transmissions of the message result in the loss of
information or transmission of inaccurate information. Also, sometimes due to
poor retention, people cannot retain the information for a long time if they are
inattentive or not interested.
o Distrust: If the communicator and communicator not trust each other, it may
act as a barrier. This is because if they do not believe each other, they may not
understand each other’s message in the desired sense.
Question :13
183
Rakesh is working under his superior Neeraj. He always communicate useful ideas
and suggestions to his superior regarding the reduction of cost, improvements in
the product, etc. Neeraj implements his suggestions and has always found
favourable results but he never appreciates Rakesh for his suggestions. Now,
Rakesh decides not to communicate any suggestion or idea to Neeraj. Identify the
factor which acts as a communication barrier. Explain three other factors of the
same group of communication barriers.
Answer:
 Due to the lack of proper incentives, Rakesh has decided not to communicate
any suggestion or idea to Neeraj. If there is no motivation or incentive for
communication, subordinates may not take initiative to communicate.
 It is a type of personal barrier. Sometimes the personal factors of both the
sender and the receiver may exert influence on effective communication. A
few of these are discussed below:
o Fear of challenge to authority: A superior may withhold or suppress the
communication which he perceives is likely to adversely affect his authority.
o Lack of confidence of superior in his subordinates: A superior may not seek the
advice or opinions of his/her subordinates if he/she does not have confidence
on their competency.
o Unwillingness to communicate: Sometimes, subordinates may deliberately
withhold any communication with their superiors if they perceive that it may
adversely affect their personal interests.
Question :14
Ayasha Ltd. assured their employees that in spite of the recession, no workers will
be retrenched from their jobs.
Name and explain the type of incentive offered to the employees.
Explain one more incentive of the same category.
Answer:
 The type of incentive offered to the employees is job security. It is a non-
financial incentive. In order to fulfill their safety needs, the employees want
certain stability about future income and work. As a result they feel motivated
and give better job performance. However, it has been observed many a times
that when people feel that they are not likely to lose their jobs, they may
become complacent.
 The other incentive of this category is employee participation. It is a means by
which the employees may be involved in the decision making process of the
issues related to them. The sense of participation motivates them to contribute
positively towards their job performance.
184
Question :15
Rajat, a sales manager, achieved his sales targets one month in advance. This
achievement was displayed on the notice board and a certificate for the best
performance was awarded to him by the CEO of the company.
Name the incentive provided to Rajat.
Identify the type of incentive.
List two other incentives of the type identified in part (2).
Answer:
 Recognition is the incentive provided to Rajat.
 It is a type of non-financial incentive.
 The two other types of non-financial incentives are job security and status.
Question :16
Mohan and Sohan are friends working in Surya Ltd. as Production Manager and
Sales Manger respectively. In an interdepartmental meeting, Sohan informed
Mohan about a change in the marketing policy of the company.
Identify the type of communication used in the above example.
Answer:
 Formal communication is being used in the above example.
Question :17
Post demonetisation, bank employees have been experiencing hectic long working
hours, which has been highly praised by all. Banks chalked out a compensation
plan for their employees, who have been working long hours like offering
compensatory “off-days” in lieu of holidays on which the employees worked, giving
“additional money” to the employees and so on. Reshma (42), who has been
working with a nationalized bank for seven years, said,” We have worked tirelessly
to meet customer’s demands,”. Moreover, she added that “There were several
circulars from the head office and RBI. We had to go through them thoroughly and
adhere to all the instructions. It is also important to ensure transactions go
smoothly and we solve customer-staff disputes,”
Identify the human need of Reshma as per Maslow’s need hierarchy theory which
was affected due to demonitisation.
Identify the type of incentives which were provided to the bank employees for
assuming their responsibility diligently.
State any two values which the banks are propagating towards their customers.
Answer:
185
 The human need of Reshma as per Maslow’s need hierarchy theory of which
was affected due to demonitisation is described below:
 Basis physiological needs: These needs are most basic in the hierarchy and are
linked to primary needs like hunger, thirst, shelter etc. Both monetary and non-
monetary incentive were being provided to the bank employees for assuming
their responsibility diligently.
 The two values which the banks are propagating towards their customers are:
o Customer satisfaction
o Trust
Question :18
Roshan is the chief chef of ‘Khidmat7 restaurant located in the city of Bangaluru.
The place is known for its exquisite Mughlai cuisine especially mutton biryani and
kababs. All the food is prepared under Roshan’s purview. The various activities in
the kitchen are initiated in accordance to his instructions. He is very clear and
specific in issuing instructions to his subordinates in order to ensure smooth
working of the department. He personally oversees the method followed by the
chefs for preparation of each dish. He misses no opportunity to praise his
subordinates for their good work. All his team members feel very happy and
satisfied under his direction. He provides constant guidance to them in order to
improve upon its taste and presentation and also encourages them to innovate
and be more creative in their work.
In the above context:
Identify the various elements of directing mentioned in the above paragraph by
quoting lines from the paragraph.
Describe briefly any two points to highlight the importance of directing as a
function of management.
Answer:
 The various elements of directing mentioned in the above paragraph are as
follows:
o Communication: “He is very clear and specific in issuing instructions to his
subordinates in order to ensure smooth working of the department.”
o Supervision-. “He personally oversees the method followed by the chefs for
preparation of each dish.”
o Leadership: “He provides constant guidance to them in order to improve upon
its taste and presentation and also encourages them to innovate and be more
creative in their work.”
o Motivation: “He misses no opportunity to praise his subordinates for their
good work.”
186
o The importance of directing as a function of management is described below:
o Initiates action: Directing helps to initiate action by people in the organisation
towards attainment of desired objectives. It is the first execution function of
management.
o Integrates employees’ efforts: Directing seeks to integrate the individual efforts
of employees in the organisation towards the realisation of the organisational
goals.
o Helps to realise their potential: Directing provides effective guidance,
motivation and leadership to the employees so as to enable them to realise
their potential and capabilities,
Question :19
Anurag has joined as a supervisor in a hospital. He realises that the support staff
workers are not working up to their full potential. Due to a constant conflict with
the management on wages, they have developed an indifferent attitude towards
it. The workers have become lazy and tend to avoid work. Moreover, there are a
few internal differences amongst the workers. In order to motivate them he starts
giving them praise and encouragement as a result of which the workers slowly
start showing improvements in their work performance.
Define the term supervision.
What are the challenges that Anurag is facing as a supervisor? Outline the role he
needs to play in overcoming them.
Answer:
 The term supervision consists of two words i.e. ‘super’ which means over and
above and ‘vision’ which means the art of seeing objects. Supervision is the
process of overseeing the work of a subordinate by his superior.
 Anurag’s role as a supervisor is very critical because:
 As a link between workers and management, he has to work towards resolving
the conflicts between management and workers. He should convey the
management’s ideas to the workers on one hand and workers’ problems to the
management on the other.
 He should strive to maintain harmony among the workers by helping to clear
out the internal difference among them.
 He has to ensure that the performance of work in the hospital is according to
the targets set. He has to assume the responsibility for task achievement and
motivates his workers effectively.
187
Question :20
Neeraj has been working as a sewing machine operator in an export house for the
past ten years. His basic work is to seam the parts of a garment together, and
attach buttons, hooks, zippers, and accessories to produce clothing. Considering
the fact that Neeraj is an experienced operator, he is well versed with the
fundamentals of industrial production and possesses good communication skills.
The plant superintendent in the factory recommends Neeraj’s name to the
production manager for the post of supervisor which will fall vacant after a month
on the retirement of the present supervisor. Consequently, Neeraj is assigned the
post of supervisor and his salary is increased accordingly. Moreover, as per the
policy of the export house, he is offered free medical aid and education to his two
children.
Identify the type of source of recruitment used by the export house to fill up the
post of supervisor. Give any two advantages of using this source.
Identify the types of financial incentives offered to Neeraj by quoting lines from
the paragraph.
Answer:
 The internal source of recruitment has been used by the export house to fill up
the post of supervisor through promotion. The two advantages of using
internal source of recruitment are stated below:
 Employees are motivated to improve their performance: When employees are
promoted internally from within an organisation, it has a positive impact on
their commitment and loyalty and they tend remain satisfied with their jobs.
Also, it may lead to a chain of promotion at lower levels in the organisation. As
a result,it motivates the employees to improve their performance through
learning and practice.
 Internal recruitment simplifies the process of selection and placement: The
candidates can be appraised more perfectly and economically as that are
already working in the organisation. As the candidates are already known to
the organisation, it is considered to be a more reliable method of recruitment.
 The types of financial incentives offered to Neeraj are as follows:
o Pay and allowances: “his salary is increased accordingly.”
o Perquisites: “as per the policy of the export house, he is offered free medical
aid and education to his two children.”
Question :21
188
After completing his bachelor’s in computer science, Abhijeet joined an IT
consultancy firm. He observed there that the senior management more often
communicated failures than successes. They rarely shared any good news related
to the growth of the firm or give any recognition to its employees for their
extraordinary contributions towards the firm. As a result, Abhijeet never felt
encouraged enough to work up to his full potential and started exploring other
avenues for employment.
Identify and explain the element of directing in the absence of which the
employees don’t feel encouraged to work.
State the importance of this element as identified in part (1) by giving any two
suitable points
Answer:
 The element of directing being referred to is motivation.
 The importance of motivation is described below:
o Improves performance: Motivation helps to improve the performance of both
the employees as well as the organisation. This is because motivated
employees contribute their maximum efforts for organisational goals.
o Reduces employee turnover: Motivation helps to reduce employee turnover
and thereby saves the cost of new recruitment and training. This is due to the
fact that the managers identify the motivational needs of employees and
provide suitable incentives. Consequently the employees feel satisfied and may
not think of leaving the organisation.
Question :22
Atuliya has started his own consultancy firm under the name ‘Happy Go Lucky’
after working for five years in a company as a wedding planner. Considering the
fact that he is into a labour intensive business and motivation is a complex process,
Atulia wants to offer such rewards and benefits that will help to fulfill the various
needs of the employees and will inspire them to give their best to the organisation.
Why is motivation considered to be a complex process?
Name the various types of needs that exist in a hierarchy within every human
being. Also, suggest any two suitable incentives for each of these that Atulia may
offer to his employees.
Answer:
 Motivation is considered to be a complex process as the individuals may differ
in their expectations, perceptions and reactions. Therefore, the same type of
motivation may not have uniform effect on all the persons.
189
 The various types of needs that exist in a hierarchy within every human being
are stated below:
linked to primary needs like hunger, thirst, shelter etc. Atulia may fulfill these
needs of his employees by providing basic salary and the necessary breaks to
use the bathroom and eat and/or drink.
and emotional harm. Atulia may offer job security and safe working conditions
to his employees for the fulfillment of these needs.
belongingness, acceptance and friendship. Atulia, by encouraging cooperative
teamwork and by being an accessible and kind manager, can fulfill these needs
of his employees.
o Esteem Needs: These include factors such as self-respect, autonomy, status,
recognition and attention. Atulia may give praise and recognition when the
employee does well, and offer promotions to fulfill these needs of his
employees.
o Self Actualisation Needs: It is the highest level of need in the hierarchy. It refers
to the drive to become what one is capable of becoming. These needs include
growth, self-fulfilment and achievement of goals. Atulia, by providing
challenging work and giving them flexibility and autonomy in their jobs, may
fulfill these needs of his employees.
Question :23
Sunidhi has started a designer studio in the basement of her residence after
completing her masters in fashion designing. She has appointed ten employees to
take care of the various aspects of the work. She interacts regularly with each
employee to tell exactly what is expected of him/her and what he/she needs to do
to be regarded as a’ good performer. At the same time she allows a free work
environment wherein the employees openly chit chat with each other in order to
fulfil their social and emotional needs. Sometimes, these interactions also lead to
spreading rumours which are not authentic.
Name and explain the two types of communication being referred to in the above
paragraph.
How does effective communication increases managerial efficiency?
Answer:
 The two types of communication being referred to in the above paragraph are
formal communication and informal communication.
190
o Formal communication: The communication that flows through official
channels de¬signed in the organisation structure is called formal
communication. This communication may take place between a subordinate
and superior or among same team employees or managers. Usually a written
record of such communications is maintained, recorded and filed in the office.
Formal communication may be further classified as – Vertical and Horizontal.
o Informal communication: Informal communication is the type of
communication that takes place without following the formal lines of
communication. It is generally referred to as the ‘grapevine’ because it spreads
throughout the organisation with its branches going out in all directions in
utter disregard to the levels of authority. The informal communication arises
out of needs of employees to exchange their views, which cannot be done
through formal channels.
 Effective communication increases managerial efficiency by lubricating the
working of the entire organisation through quick and effective performance of
managerial functions. It enables the management to express the goals and
targets, issue instructions, allocate jobs and responsibilities and look after the
performance of subordinates.
Question :24
Gagan has joined as a Managing Director of True Help Ltd., a company engaged in
the business of providing roadside assistance to the vehicle owners. He was
previously working in an automobile company. As a part of the joining incentive,
the company has allotted him 400 shares of the company.
Identify the type of source of recruitment used by True Help Ltd. to fill up the post
of Managing Director.
Identify the type of financial incentive offered to Gagan. Also, state any one other
method that can be used to offer financial incentives to the employees.
Answer:
 External source of recruitment has been used by True Help Ltd. to fill up the
post of Managing Director.
 Co-partnership/ Stock option is the type of financial incentive offered to Gagan.
 The other method that can be used to offer financial incentives to the
employees is Bonus. Bonus is an incentive offered over and above the wages/
salary to the employees
Question :25
191
Yash has set up a small-scale manufacturing unit for making different varieties of
low cost detergents. In order to market his product, he has employed a team of
five salesmen. Each salesman has been assigned specific areas in the city. He holds
a meeting every month for determining the objectives to achieved during the
coming month. A sales target is pre¬determined for each month which is mutually
agreed by both Yash and his sales team. If the salesmen succeed in reaching this
target a bonus is paid out to all of them along with the monthly salary.
What style of leadership is adopted by Yash? Explain by quoting lines from the
para.
Name the type of non financial incentive being offered to the salesmen by seeking
their involvement in deciding the monthly targets of the firm.
Answer:
 The democratic style of leadership is adopted by Yash. A democratic leader
encourages his subordinates to participate in the process of decision making.
Thereby, the manager is able to motivate his subordinates to perform their
best, as they themselves have set the goals.
 “A sales target is pre-determined for each month which is mutually agreed by
both Yash and his sales team.”
 Employee participation is the type of non-financial incentive that is being
offered to the salesmen by seeking their involvement in deciding the monthly
targets of the firm.
Question :26
Priyank works as a banquet manager in a hotel. He feels highly motivated at his job
because the work that is assigned to him frequently involves variety of challenges.
He is given more autonomy and responsibility and provided with ample
opportunities for personal growth and a meaningful work experience.
Define the term ‘motivation’.
What are the measures used to motivate the employees to improve performance
known as?Give its classification.
Identify the type of non-financial incentive being offered to Priyank.
Answer:
 Motivation refers to the process of stimulating people to action to achieve
desired goals.
 The measures used to motivate the employees to improve performance are
known as incentives. These incentives may be broadly classified as financial
and non-financial.
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 Job Enrichment is the type of non-financial incentive being offered to Priyank.
Question :27
Google Inc. is an American multinational corporation that is best known for
running one of the largest search engines on the World Wide Web (WWW). Every
day, 200 million people use it. Google was named the 2014 “Best Company to
Work For” by the Great Place to Work Institute and Fortune Magazine. The
organization topped the’list for the fifth time. The company hosts employee
forums on all fridays where there is an examination of the 20 most asked
questions. Moreover, its employees can make use of any of a number of channels
of expression to communicate their ideas and thoughts. Channels include Google+
conversations, a wide variety of surveys, Fixits (24 hour sprints wholly dedicated to
fixing a specific problem) and even direct emails to any of the Google leaders.
Identify the type of communication barrier being overcome by Google Inc. by
providing a number of channels of expression to their employees to communicate
their ideas and thoughts.
Briefly explain any two other types of communication barriers.
Answer:
 Organisational barrier is being overcome by providing organisation facilities
through a number of channels of expression to their employees to
communicate their ideas and thoughts.
 Two other types of communication barriers are described below:
o Psychological barriers: Sometimes the emotional or psychological factors act as
barriers to communicators. Thus, the state of mind of both sender and receiver
of communication reflects in effective communication. For example, premature
evaluation, distrust etc.
o Semantic barriers: These barriers are concerned with problems and
obstructions in the process of encoding and decoding of message into words or
impressions. Normally, such barriers result on account of use of wrong words,
faulty translations, different interpretations etc.
Question :28
Nikhil runs a small dhabba on the Jaipur highway. He is very rigid and follows a
strict policy of punishment like cutting the salary, stopping increments or giving job
termination threats to his workers for any kind of discrepancies in their work. He
does not seek advice or opinions from his workers, as he does not have any
confidence on the competence of his workers. Also, the workers are not willing to
offer useful suggestions as they do not expect any motivation or incentive for
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taking such initiatives. As a result, the labour turnover is high and his business has
been adversely affected.
Name and explain the style of leadership adopted by Nikhil.
Identify the various human needs of workers that are being overlooked by Nikhil as
per the Maslow’s need hierarchy theory of motivation.
Identify the type of communication barrier created by Nikhil due to which the
workers suppress their need to communicate with him.
Answer:
 The autocratic style of leadership has been adopted by Nikhil. An autocratic
leader expects strict compliance from his subordinates with regard to the
orders and instructions given by him. Therefore, it involves only one-way
communication.
 The various human needs of the workers that are being overlooked by Nikhil as
per the Maslow’s need hierarchy theory of motivation are listed below:
linked to primary needs like hunger, thirst, shelter etc.
and emotional harm. Personal barriers have been created by Nikhil due to
which the workers suppress their need to communicate with him freely.
o Lack of confidence of superior on his subordinates: If superiors do not have
confidence on the competency of their subordinates, they may not seek their
advice or opinions.
o Lack of proper incentives: If there is no motivation or incentive for
communication, subordinates may not take initiative to communicate. For
example, if there is no reward or appreciation for a good suggestion, the
subordinates may not be willing to offer useful suggestions.
Question :29
After pursuing a course in gemmology from Australia, Raj started a workshop in
Surat to supplement his father’s jewellery business in Delhi. He is used to speaking
in English but the local skilled workers understand only Hindi and Gujarati. Hence,
he started facing problems in the work due to miscommunications between him
and the workers. As a result, he is not able to get the jewellery designs made in the
desired manner and getting them redesigned turns out to be very expensive.
Define the term ‘communication’.
Identify the type of communication barrier being referred to in the above
paragraph.
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Suggest any four measures by which he can improve his communication
effectiveness.
Answer:
 Communication is a process by which people create and share information
with one another in order to reach common understanding.
 Semantic barrier is being referred to in the above paragraph.
 The four measures by which he can improve his communication effectiveness
are suggested below:
o Communicate according to the needs of receiver: Raj should adjust his
communication according to the education and understanding levels of his
subordinates.
o Be aware of languages, tone and content of message: The contents of the
message, tone, and language used and the manner in which the message is to
be communicated are the important aspects of effective communication.
o Ensure proper feedback: He may ensure the success of communication by
asking questions regarding the message conveyed. Thus the communication
process may be improved by the feedback received to ensure that the workers
have understood his ideas clearly.
o Follow up communications: He should do a regular follow up and review on the
instructions given to the workers. Such follow up measures help in removing
hurdles, if any, in implementing the instructions.
Question :30
Josh Enterprises decides to have a meeting of all the key employees of different
departments in the organisation. The main motive is to tell the employees to keep
the target of 20% increase in sales as the main objective when they work
throughout the year. The meeting is full of ideas regarding the employees and
processes involved. Various plans are made to harness the potential of the
employees and streamline the processes. However with the passage of a few days
the external business environment checks the capability of the organisation to
adapt to the situations. The company successfully comes out at the end of the year
with flying colours.
What are the various characteristics of management you can find highlighted
here? Also identify the lines in which these characteristics have been highlighted.
Answer:
 The various characteristics of management involved here are:
o Goal Oriented. The main motive is to tell the employees to keep the target of
20% increase in sales as the main objective when they work throughout the
year.
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o Multidimensional. Various plans are made to harness the potential of the
employees and streamline the processes. Employees—People, and Streamline
the process—Operations.
o Dynamic. However with the passage of a few days the external business
environment checks the capability of the organisation to adapt to the
situations.
Question :31
XYZ Ltd. is a management-oriented company. Time and again all the employees
learn from their seniors’ various ways of dealing with diverse situations. They are
provided training whenever required. They are also given incentives both financial
as well as non-financial. The result is employees see their development in the
organisation. The organisation tries to behave as a responsible constituent of
society and ahvays creates good quality products. It has a very good image in the
market. The training modules are superb and the employees always try to find
unique ways of providing solutions in the context of rapidly changing business
environment. This has helped the organisation to adjust frequently in a very good
manner.
Which importance of management is highlighted here? Also identify the lines.
Answer:
o Development of personnel. They are also given incentives both financial as well
as non financial. The result is employees see their development in the
organisation.
o Development of society. The organisation tries to behave as a responsible
constituent of society and always creates good quality products.
o Helps in becoming dynamic organisation. The training modules are superb and
the employees always try to find unique ways of providing solutions in the
context of rapidly changing business environment.
Question :32
Gold Land Pvt. Ltd. is a wheat producing company. Daily 5000 bags of wheat
weighing 10 kg each are produced here. In comparison to the previous year this
ere has been less number of bags produced on a per day basis. The number is
around 4500 which is less than the target of 5000 set by the company. The
company however has been able to reduce the costs involved in comparison to last
year’s spending on the production and packaging of each bag. The quality of bags
has also been up to the mark.
Identify the concept of management ignored here.
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Answer:
 The concept ignored here is that of effectiveness as the quantity produced
here is lesser than targeted. Effectiveness requires output to be in required
quantity, time and quality.
Question :33
A floor manager of a mall is a very good manager as he utilizes all the functions of
management to minimize cost of maintenance of his area. He directs all the staff
members under him to follow the targets and advises them to put their efforts in
the direction of achievement of these targets. Under his guidance the employees
admit that they learn a lot and are able to meet their targets. This has led to the
increase in their salaries. Identify the importance of management highlighted
above.
Answer:
o Management increases efficiency. A floor manager of a mall is a very good
manager as he utilizes all the functions of management to minimize cost of
maintenance of his area,
o Management helps in achieving group goals. He directs all the staff members
under him to follow the targets and advises them to put their efforts in the
direction of achievement of these targets.
o Management helps in achieving personal objectives. This has led to the
increase in their salaries.
Question :34
ABCD Inc. is a company which deals with providing car service at home and on
road. There are different departments in this company like Human Resources,
Marketing, Finance, Research & Development and Operations. The top
management of the company tries its level best to synchronize the activities of
different departments in the best possible manner. The result is the increased
efficiency and attainment of goals. However, with the passing of time the size of
the company has grown and now there are many branches of this company. The
synchronization has turned more important with the increase in the size of the
company and the number of employees. The Departmental Heads cf the company
are specialists in their respective areas and the top management tries to work with
them not with authority but by respecting their views on the subject. Their ego
clashes are avoided to ensure smooth functioning of the organisation.
Identify the concept of management highlighted above. Write two benefits
highlighted in the above paragraph of this concept.
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Answer:
 The concept of management highlighted above is that of Coordination. The top
management of company tries its level best to synchronize the activities of
different departments in the best possible manner.
 The importance of coordination:
o Growth in size. When the organisation grows in size coordination plays an
important role in synchronizing all the activities as the number of employees
and branches increases. The synchronization has turned more important with
the increase in the size of the company and the number of employees.
o Specialisation. The specialists like the departmental heads cannot be tackled
just by unity of command. They have their own egos. Here the best way to
tackle them is to ensure coordination among them. Their ego clashes are
avoided to ensure smooth functioning of the organisation.
Question :35
Alpha Beta Inc. decided to go for perfect coordination in the various aspects of the
company. They focus on synchronization of all the activities of the organisation.
For this they know coordination will be the key. At the stage of thinking of what is
to be done throughout the year they decide to take into consideration the
harmony between the goals of the organisation and those of the individual
departments. When they hire employees they pay them only after evaluating their
worth in terms of how efficient they are. Finally when the last month of production
comes they, time and again check the deviation between the set targets and the
actual production done.
In the above paragraph the main focus is on coordination. However various
functions of management also come into picture. You have to identify the three
functions of management highlighted above in which coordination can be seen.
Answer:
 The various functions of management highlighted above are:
o Planning. At the stage of thinking of what is to be done throughout the
year they decide to take into consideration the harmony between the goals of
the organisation and those of the individual departments.
o Staffing. When they hire employees they pay them only after evaluating their
worth in terms of how efficient they are.
o Controlling. Finally when the last month of production came they were time
and again
Question :36
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Saagar Ltd. believes in coordination among departments and activities. The
company relies heavily on professional coordination. For this the company takes
steps throughout the year. Coordination is kept in mind by all the managers
regardless of the level they are working at. Throughout the year the various
activities are synchronized without failure. Every department ensures that within it
every employee and operation is guided by the theme of proper coordination.
Whenever an employee takes an action he consults others, whenever needed, thus
properly contributing to his team. The process of coordination is just not limited to
the employees. Even at the departmental level the various departments use this
binding force to create perfect harmony among them so that the organisational
goals can be fulfilled. All the coordination that occurs in the organisation is a result
of proper training and premeditated attempts by the company to get the best
results possible. .
The above case represents all the characteristics of coordination. Identify the lines
which represent them and also name the characteristics.
Answer:
 Coordination is the responsibility of all managers. Coordination is kept in mind
by all the managers regardless of the level they are working at.
 Coordination is a continuous process. Throughout the year the various
activities are synchronized without failure.
 Coordination is all pervasive. Every department ensures that within it every
employee and operation is guided by the theme of proper coordination.
 Coordination is a group activity. Whenever an employee takes an action he
consults, others whenever needed, thus giving properly contributing to his
team.
 Coordination involves unity of action. Even at the departmental level the
various departments use this binding force to create perfect harmony among
them so that the organisational goals can be fulfilled.
 Coordination is a deliberate function. All the coordination that occurs in the
organisation is a result of proper training and premeditated attempts by the
company to get the best results possible.
Question :37
Radio XYZ is a company which has improved its functioning by proper
management. The company has been good in fixing and completing targets. The
main reason for its success has been the involvement of all of the employees. The
company tries to keep its targets in front of the employees so that each one of
them can contribute to the completion of goals. Though their activities may be
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different yet they contribute to the common targets or goals of the organisation.
The company has won the prize for the best organisational climate. This has been
possible due to the impact of great managerial discipline which might not be
visible to an outsider in the first look but he realises it when he stays in the
organisation. Gradually the organisation has developed itself into a very successful
company. It has produced different types of radios according to the needs of the
customers. During last decade it has adapted to the requirements of the market
and produced different type of radios suiting the needs of the customers. The
management of three components is always significant to the company —
employees, process and amount of work to be done. Controlling these three areas
is always a top priority to the company. Recently a meeting was held which laid
stress on the need of taking good management to all levels and departments of
the organisation.
In the above case find all the characteristics of management and highlight the lines
which help you identify them.
Answer:
 The following characteristics of Management have been highlighted:
 Management is a goal oriented process. The company has been good in fixing
and completing targets.
 Management is a group activity. Though their activities may be different yet
they contribute to the common targets or goals of the organisation.
 Management is an intangible force. This has been possible due to the impact of
great managerial discipline which might not be visible to an outsider in the first
look but he realises it when he stays in the organisation.
 Management is a dynamic function. During last decade it has adapted to the
require-ments of the market and produced different type of radios suiting the
needs of the customers.
 Management is multidimensional. The management of three components is
always significant to the company—employees, process and amount of work to
be done.
 Management is all pervasive. Recently a meeting was held which laid stress on
the need of taking good management to all levels and departments of the
organisation.
Question :38
Dheeraj, Neeraj and Suraj are three friends. They work in the same company. They
are managers but they belong to three different levels of management. Every day
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they meet and discuss their work with each other. One day they were having a
conversation.
Dheeraj said, “These days I am having a lot of problems motivating the people at
Shop Floor. I have decided to purchase two new machines. I know I will have to set
an example by being the best leader.”
Neeraj said, “I am having problem with knowing the exact requirement of people
in my department. Different polices have to be informed to the employees so that
they become aware of our company’s goals. I also have to coordinate with other
departmental heads to know their requirements.”
Suraj said, “I have to decide for long term. I know I will be ultimately responsible
for every activity. All the policies and strategies require a lot of planning before
formulation.”
In the above case identify the different levels of management these three friends
belong to.
Answer:
 Dheeraj belongs to lower level of management. Lower level manager works at
the Shop Floor level. Shop Floor is the place where workers work and machines
are kept.
 Neeraj belongs to middle level management. Middle level manager decides the
number of employees to be required in his department. He also has to
coordinate with other departmental heads though at the same level.
 Suraj belongs to the Top level of management. Top level manager is required
to plan for long term basis. He is responsible for all the activities in the
organisation. Policies and strategies are formulated by the Top management.
Question :39
In a country named Wonderland acting is considered as a profession. Whosoever
has to become an actor has to read books written about acting. These books tell
the nuances of acting and without reading these books one can’t be considered as
an actor. To judge the ability of an actor an examination is conducted and then a
degree is assigned to the qualified persons who can then act in films. There is also
a body which provides membership to all actors. There are about thirty thousand
actors in wonderland who are compulsorily members of this organisation.
What are the three features of profession highlighted here? Also identify the lines
highlighting these features?
Answer:
 The three features of profession highlighted here are:
o Well-defined body of knowledge. An actor has to read books written about
acting.
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o Restricted Entry. To judge the ability of an actor an examination is conducted
and then a degree is assigned to the qualified person who can act in films.
o Professional Association. Actors in wonderland who are compulsorily members
of this organisation.
Question :40
Faulty works Inc. has a very dynamic Plant Superintendent, Amit, who is fond of
dealing with tough situations. He is a perfectionist who believes in doing quality
management. Every week he prepares a schedule which helps in minimization of
wastage of efforts and time of the department. He however is upset with the
cutthroat competition among the employees which is having a negative impact on
the overall production. Even after all such problems he is managing the situation
very well. On 26th Feb he informs his boss that the target given to him has been
achieved and with the best quality.
The best part was that still two days were remaining for the dead line to be over
which was 28th Feb. However his boss was not pleased as the cost incurred by his
team for the completion of project is more than the allowed limit.
In the above case find out the concepts of management violated and the concepts
lollowed? Also tell at which level of management does Amit work?
Answer:
 The concepts of management which have been violated are:
o Cooperation. There is so much competition among the employees that there is
negative outcome of it.
o Efficiency. There has been more than expected spending of resources which
has led to increase in overall costs incurred.
o The concepts of management which have been followed are:
o Coordination. Every week he prepares schedule and thus brings down wastage
of efforts.
o Effectiveness. As the work is completed before time and with required quality.
Amit works at the middle level management as Plant Superintendent is a
middle level manager.
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Chapter 8 Controlling
Question :1
Gagan is trying to apply a function of management in his department. First he lets
his team perform according to their best potential. Then in a meeting he calls ody
and asks his team to check what they have performed. One day it was found that
the total number of units produced were 20 less than the set target. It was decided
that no worker will go home unless and until this gap of 20 units is overcome.
Which function of management is being performed by Gagan and his team?
What is ’20’ in the above case?
At which stage of management do you think the target was set? What is its signi-
ficance now?
Answer:
 In the above case the function performed by Gagan and his team is controlling.
 ’20’ in the above case is deviation. Gap between actual performance and set
standards.
 The target was set at the planning stage of management. The significance of
planning is that it sets standards in the form of targets so that controlling could
be done by minimizing deviations.
Question :2
Saurabh is working in an MNC. He has created an atmosphere of proper controlling
in his department. In order to do so he keeps himselfaware about any dishonest
behaviour and takes a stern action immediately. Recently he has installed CCTV
cameras to keep vigil on the employees.
In the above case which importance of controlling has been implemented by
Saurabh?
Name one more importance of controlling other than the above highlighted.
Can you suggest one more way by which Saurabh could have implemented
controlling?
Answer:
 The importance of controlling implemented in the above case by Saurabh is:
o Controlling ensures proper order and discipline in the organisation.
o One more importance of controlling. Controlling helps in making efficient use
of resources.
o Saurabh could have implemented controlling by issuing balance score card to
every employee. In this way could check their performance and contribution to
the organisation on a daily basis.
Question :3
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Savita has been assigned the job of quantity controller. She knows this is a tough
job but she also realises the importance of it. Her daily routine is to send alarm to
the manufacturing department about the deviations in the number of units
produced so that the target of the day could be achieved. This helps the whole
department to focus towards its main plan of action. However one day she realises
that the number of units which are to be produced is 500 which is very high and
creates chaos at the shop floor. She discusses it with the management and the
target is reduced to 450. This has helped the manufacturing department in
maintaining quality of the work done. There are 10 workers at the shop floor
where Savita does inspection. She divided the task into 45 units for each worker so
that by the end of the day the target of the department is completed.
Which benefits of controlling have been highlighted in the above case?
Name one department where controlling should be applied in proper coordination
with the manufacturing department for proper quality control of the
manufactured products.
Answer:
 The benefits of controlling highlighted in the above case are:
o Controlling helps in accomplishing organisational goals. Her daily routine is to
send alarm to the manufacturing department about the deviations in the
number of units produced so that the target of the day could be achieved.
o Controlling helps in judging accuracy of set standards. However one day she
realises that the number of units which are to be produced is 500 which is very
high and creates chaos at the shop floor, she discusses it with the management
and the target is reduced to 450.
o Controlling helps in facilitating coordination in action. She has divided the task
into 45 units for each worker so that by the end of the day the target of the
department is completed.
o One department where controlling should be applied in proper coordination
with the manufacturing department for proper quality control of the
manufactured products is purchase department. Unless and until input is good
output can never be good. For high quality manufactured product the raw
material should be of high quality and this is the area of concern of the
purchase department.
Question :4
Parasmani Ship Builders is a renowned ship manufacturing company. The company
is doing well but the employees keep on complaining as they say there are no
standards to judge the state of mind of the employees, their motivation and job
satisfaction levels. The HR department is trying to see to the problems which have
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recently occurred with the employees. In other areas however company has set
some standards and is trying to effect the control mechanism but the company
finds all such efforts expensive. All this has not been so easy. Employees in other
departments like manufacturing, purchase, marketing, etc. have time and again
resisted to the installation of computer monitoring systems and CCTVs. They say
that it is against their freedom. Despite all these great efforts made by the
company it had to face losses last year. Even though all the control mechanisms
are in place there is an entry of competitors with better technology. This has given
some bad time to the company despite its alertness in putting proper controlling in
execution.
Which concept of management has been highlighted in the above case?
Identify the different types of this concept of management highlighted in. the
above case.
Answer:
 The concept of management which is highlighted in the above case is
‘limitations of controlling’.
 The different limitations of controlling highlighted in the above case are:
o It is difficult to set quantitative standards when it comes to controlling. The
company is doing well but the employees keep on complaining as they say
there are no standards to judge the state of mind of the employees, their
motivation and job satisfaction levels.
o Controlling is costly. In other areas however company has set some standards
and is trying to effect the control mechanism but the company finds all such
efforts expensive.
o Controlling has to face resistance from employees. Employees in other
departments
o like manufacturing, purchase, marketing, etc. have time and again resisted to
the installation of computer monitoring systems and CCTVs. .
o An organisation has little control on external factors. Even though all the
control mechanisms are in place there is entry of competitors with better
technology.
Question: 5
Adarsh is trying to reduce wastage of resources in his company. He is trying to do it
in the best possible manner. He has set standards for performance of different
types of activities and is doing his level best to perform according to
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these set standards to minimise wastage of resources. Things are not going to be
over for him as he will have to look into other aspects too. He has set up a good
monitoring system which helps him know how to employees ate performing
according to set standards as when the employees meet these standards they will
be given incentives. He is hoping to pull out a good performance from his team this
year.
Which function of management has been referred to in the above case?
Which benefits of this function of management have been highlighted in the above
case?
Answer:
 The function of management which has been referred to in the above case is
controlling.
 The benefits of controlling highlighted in the above case are:
o Controlling helps in efficient utilisation of resources. He has set standards for
performance of different types of activities and is doing his level best to
perform according to these set standards to minimise wastage of resources.
o Controlling helps in improving employee motivation. He has set up a good
monitoring system which helps him know how employees are performing
according to set standards as when the employees meet these standards they
will be given incentives.
Question :6
Identify the step of controlling process applicable in the following cases:
1. Esha is keenly observing the quantity of capsules produced in a
pharmaceutical company. She realises that there is no need for any action to
be taken as the deviations are within the acceptable limits. A day later when
she comes to work she finds the situation opposite to that of the previous
day. This lime the deviation wa’S beyond the acceptable range and needed
immediate action. She called her subordinates and told them that this
should not happen again.
2. Mahesh who is the owner of a company has decided to focus only on a few
activities of his business. He considers that the rest of all activities are not
critical to the performance of his company. One such area he finds is of
labour. The labour cost recently went up by 4% sending signals of coming
danger. Now he will put his efforts to control this variation by arranging
labour at a cheaper rate.
3. In a company a manager is trying to find out the deviation between the
actual number of fans produced and the desired number. He already knows
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about the standard as the company has assigned him a definite quantity of
fans to be produced.
4. Manoj Khanna a senior experience manager is concerned about the 2% rise
in the raw materials. However he knows that this is an acceptable range. He
tells his staff that if this rise goes beyond 2% it should be brought into the
notice of management. Then he sets a limit of 5% when the management
should give it the priority over other activities.
5. Virendra wants to ran his company in a different manner. He wants to set
standards to be achieved in both qualitative as well as quantitative terms.
He wants to judge the motivation, skill levels and satisfaction of the
employees. Ail these things will require qualitative standards. On the other
hand the company will have to set quantitative standards for the number of
units produced.
6. Some employees have been assigned the job of judging the output of
production in a neutral and reliable way. They are applying different
techniques for achieving this aim. Some of these are personal observation,
sample checking, etc. They are also keeping the units of measurement same
to that of the units of set standards.
Answer:
 The different steps of the controlling process applicable in the above cases are:
1. Taking corrective action.
2. Analysing deviations. Critical point control is the technique used.
3. Comparing actual and standard performance.
4. Analysing deviations. Management by exception is the technique used.
5. Setting standards.
6. Measurement of actual performance.
Question :7
‘A.S. Ltd.’ is a large company engaged in assembly of air-conditioners. Recently the
company had conducted the ‘Time’ and ‘Motion’ study and concluded that on an
average a worker can assemble ten air-conditioners in a day. The target volume of
the company in a day is assembling of 1,000 units of air-conditioners. The company
is providing attractive allowances to reduce labour turnover and absenteeism. All
the workers are happy. Even then the assembly of air-conditioners per day is 800
units only. To find out the reason the company compared actual performance of
each worker and observed through C.C.T.V. that some of the workers were busy in
gossiping.
Identify the function of management discussed above.
207
State those steps in the process of the function Identified which are discussed in
the above paragraph.
Answer:
 Function of management – Controlling.
 Following steps of controlling are identified in the given para:
o Setting performance standards which are the criteria against which the actual
performance would be measured.
o ‘…. and concluded that on an average a worker can assemble ten air-
conditioners in a day.’
o Measurement of actual performance with the standards in an objective and
reliable maimer.
o ‘Even then the assembly of air-conditioners per day is 800 units only.’
o Comparing actual performance with standards to find out any deviations.
o ‘…. the company compared actual performance of each worker and observed
through C.C.T.V’
Question :8
Hina Sweets is a renowned name for quality sweets since 1935. Harsh the owner of
Hina Sweets was worried as the sales had declined during the last three months.
When he enquired from the Sales Manager, the Sales Manager reported that there
were some complaints about the quality of sweets. Therefore, Harsh ordered for
sample checking of sweets.
Identify the step taken by Harsh that is related to one of the functions of
management
Answer:
 Sample checking is a technique of Measurement of actual performance
(Controlling).
Question :9
Isha Machnies was a renowned name for quality sewing machines since 1960.
Mr. Suresh, the owner of Isha Machnies, was worried as the production had
declined during the last three months. He directed the Production Manager to find
out the reason. The Product Manager ordered the different supervisor to prepare
a performance report of the workers working under them.
Identify the steps taken by the Production Manager that is related to one of the
functions of management.
Answer:
 Measurement of actual performance which is related to (controlling) function
of management.
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Question :10
Peter is a production manager in a tyre manufacturing company. Recently he
noticed that his team could not achieve the target production of 80 units per day.
Instead on an average the production touched the target of only 65 units. On
thorough analysis he found out that the deviation between standard production
and actual production is far beyond acceptable range, on overall analysis he also
found out that there has been a marginal increase in office stationery expenses.
Moreover, he detected that the machine installed for the purpose of
manufacturing was not able to perform at its best Being a management expert
suggest Peter how he should deal with the existing problem.
Answer:
 Peter should follow the following principles of managerial control while
analysing deviations:
o Critical point control. According to this principle of managerial control a
manager should focus on Key Result Areas (KRAs) that are critical to the
success of an organisation. A manager should not waste his precious time on
checking each and every activity in the organisation. He should focus on those
areas which are critical to the success of the enterprise. In the above case Peter
should focus on improving the performance of the machinery either by
repairing it or by replacing it with the new one. Marginal increase in stationery
expenses can be dealt later by him.
o Management/Control by Exception. As per this principle of managerial control
a manager trying to control everything may end up controlling nothing.
Therefore, only significant deviations that go beyond the permissible limit
should be brought to the notice of management. In the above case poor
performance of machinery needs immediate managerial attention.
Question : 11
A company was manufacturing LED bulbs which were in great demand. It was
found that the target of producing 300 bulbs a day was not met by the employees.
On analysis, it was found that the workers were not at fault. Due to electricity
failure and shortage of workers, the company was not able to achieve the set
targets and alternative arrangements were needed.
To meet the increased demand, the company assessed that approximately 88
additional workers were required out of which 8 would work as heads of different
departments and 10 would work as subordinates under each head. The required
qualifications and job specifications were also enlisted. It was also decided that
necessary relaxations should be given to encourage women, people from
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backward and rural areas and people with special abilities to assume responsible
positions in the organisations. All efforts were made to match the ability of the
applicants with the nature of work.
Identify the functions of management discussed above.
State the two steps in the process of each function discussed in the above
paragraph.
List any two values which the company wants to communicate to the society.
Answer:
 The functions of management discussed above are Staffing and Controlling.
 The two steps involved in staffing function are as follows:
o Estimating manpower requirements: The manpower requirements of an
organisation are estimated through workload analysis and workforce analysis.
The workload analysis helps to determine the number and type of human
resource required in the organisation to meet its present and future needs.
Whereas workforce analysis seeks to determine the number and type of
human resource available within the organisation.
o Recruitment: The process of recruitment involves searching for the prospective
candidates and stimulating them to apply for jobs in the organisation. There
are two sources of recruitment namely, internal and external.
 The two steps involved in controlling function are as follows:
o Comparing actual performance with standards to identify deviations if any.
o “It was found that the target of producing 300 bulbs a day was not met by the
employees.”
o Analysing deviations through critical point control and management by
exception approach to identify the causes for their occurrence.
o “On analysis, it was found that the workers were not at fault. Due to electricity
targets and alternative arrangements were needed.”
o Taking corrective action, if required “To meet the increased demand, the
company assessed that approximately … as subordinate under each head.”
o Women empowerment
o Kindness.
Question :12
‘AS Ltd.’ is a large company engaged in assembling of air-conditioners. Recently the
average, a worker can assemble ten air-conditioners in a day. The target volume of
210
the workers are happy. Even then the assembling of air-conditioners per day is 800
units only. To find out the reason, the company compared actual performance of
each worker and observed through CCTV that some of the workers were busy in
gossiping.
State the steps in the process of the function identified which are discussed in the
above paragraph.
Answer:
 The function of management discussed above is Controlling.
 The steps involved in the process of controlling which are discussed in the
above paragraph are:
o Setting standards of performance: “concluded that on an average, a worker
can assemble ten air-conditioners in a day.” “The target volume of the
company in a day is assembling of 1,000 units of air-conditioners.”
o Measurement of actual performance: ” Even then the assembling of air-
conditioners per day is 800 units only.”
o Comparison of actual performance with the standards: The company compared
actual performance of the workers with the planned performance and noted
deviation of 200 units.
o Analysing deviations: “To find out the reason, the company compared the
actual performance of each worker and observed through CCTV that some of
the workers were busy in gossiping.”
Question :13
PQR Ltd. is engaged in manufacturing machine components. The target production
is 200 units per day. The company had been successfully attaining this target until
two months ago. Over the last two months, it has been observed that daily
production varies between 150-170 units.
Identify the management function to rectify the above situation.
Briefly state the procedure to be followed so that the actual production may come
up to the target production.
Answer:
 The controlling function of management is needed to rectify the above
situation.
 The procedure to be followed so that the actual production may come up with
the target production is as follows:
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o Providing training to workers if the workers are not well versed with the
production process.
o Improving the work environment if it is not conducive to efficient working.
o Ensuring timely availability of the raw materials and other equipments if they
are not made available on time.
o Replacing the machinery if it is defective or has become obsolete.
Question :14
Rajeev and Sanjeev are managers in the same organisation heading different units.
While discussing about the functions of management, Rajeev says that ‘Planning is
looking ahead whereas controlling is looking back.’ But Sanjeev says, ‘You are
wrong because planning is looking back whereas controlling is looking ahead.’ Both
are giving reasons in favour of their statements. Explain the possible reasons given
by both and justify who is correct.
Answer:
 Both Rajeev and Sanjeev are correct in their statements as explained below:
 Planning is considered as a forward looking function by Rajeev as plans are
made for future.
 Planning may be considered as a backward looking function by Sanjeev
because the quality of planning can be improved with the help of valuable
information provided by controlling in terms of results achieved.
 Controlling is considered as a backward looking function by Rajeev as it is like
the post mortem of the past activities to ascertain the deviations if any.
 Controlling is considered as a forward looking function by Sanjeev as it helps to
improve the future performance by providing guidance for taking corrective
action so that deviations do not reoccur in future.
Question :15
Kapil & Co. is a large manufacturing unit. Recently the company had conducted
time and motion studies and concluded that on an average, a worker could
produce 300 units per day. However, it has been noticed that the average daily
production per worker is in the range of 200-225 units.
Name the function of management and identify the steps in the process of this
function which helped in finding out that the actual production of a worker is less
than the set target.
To complete the process of the function identified in (1) and to ensure the
performance as per time and motion studies, explain what further steps a manager
has to take?
Answer:
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 Controlling is the function of management which helped in finding out that the
actual performance of a worker is less than the set target.
 The steps involved in the controlling function of management which helped in
finding out that the actual performance of a worker is less than the set target
are outlined below:
o Setting performance standards in clear, specific and measurable terms.
“Recently the company had conducted time and motion studies and concluded
that on an average, a worker could produce 300 units per day.”
o Measurement of actual performance as far as possible in the same units in
which standards are set.
“It has been noticed that the average daily production per worker is in the
range of 200-225 units”.
o Comparing actual performance with standards to identify deviations if any.
In the given case there is a deviation in output in the range of 25-50 units per
worker.
In order to complete the process of controlling and to ensure the performance
as per time and motion studies the manager has to further take the following
two steps:
o Analyzing deviations through critical point control and management by
exception approach: In the given situation, there is a deviation in output in the
range of 25-50 units per worker. The manager should analyse the reasons for
the same. The possible reasons for the same are:
The workers are not well versed with the production process.
The working environment is not conducive to efficient working.
The raw materials and other equipment are not available on time.
o Taking corrective action: The deviations require immediate management
attention so that they do not reoccur in future. Therefore, the manager should
take appropriate corrective action after analyzing the situation like providing
training to workers, improving the work environment, and ensuring timely
availability of the raw materials and other equipment.
Question :16
K&K Co. Ltd. is engaged in manufacturing of machine components. The target of
production is 200 units daily. The company had been successfully attaining this
target until two months ago. Over the last two months it has been observed that
daily production varies between 150-170 units. Identify the possible causes for the
decline in production and the steps to be taken to achieve the desire targets.
Answer:
 The possible causes for decline in production are listed below:
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 The workers are not well versed with the production process.
 The working environment is not conducive to efficient working.
 The raw materials and other equipment are not available on time.
 The machinery is defective or has become obsolete.
 The deviations require immediate management attention so that- they do not
reoccur in future. Therefore, the manager should take appropriate corrective
action after analyzing the situation like providing training to workers,
improving the work environment, ensuring timely availability of the raw
materials and other equipment or replacing the machinery.
Question :17
‘Taste Buds Ltd.’ is a company known for manufacturing good quality confectionery
products. The automated system of production ensures uniformity in production
and quality maintenance. The quality assurance team conducts stringent checks at
all stages, records and analyses the deviations and takes the necessary corrective
actions right from the procurement of raw material to its processing, production
and packaging. The company has a well-equipped in¬house quality inspection cell
where confectionery products are tested on various parameters of quality by the
team of experienced quality staff.
Identify and explain the function of management being performed by the quality
assurance team of ‘Taste Buds Ltd.’
Explain the statement, “records and analyses the deviations and takes the
necessary corrective actions”.
Answer:
 Controlling is the function of management being performed by the quality
assurance team of ‘Taste Buds Ltd.’
 Controlling is the process of ensuring that events conform to plans.
 The statement “records and analyses the deviations and takes the necessary
corrective actions” refers to the following steps involved in the process of
controlling:
 Comparing the actual performance with the standards: The actual performance
is compared with the standards and deviations, if any, are recorded.
 Analysing deviations: Once the deviations are identified, it is important to
analyse them through:
 Critical point control: All the deviations may not be significant. Moreover, it
may not be either economical nor easy to monitor each and every activity in
the organisation. Therefore, every organisation identifies and states its specific
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key result areas (KRAs) or critical points which require tight control as they are
likely to have a significant effect on the working of the business. Any deviations
on these points are attended to urgently by the management. Like in the above
case, if the expenditure on refreshment of workers goes up by 10% it can be
ignored but if the production cost goes up by 5% it may call for managerial
action.
 Management by exception: Management by exception is the principle of
manage¬ment control which is based on the belief that if you try to control
everything, you may end up controlling nothing. Therefore, only significant
deviations which go beyond the permissible limits should be brought to the
notice of the management. Like in the above case, the output defects upto 2%
may be considered acceptable but if it goes up by 5%, it may cal for managerial
action.
 Taking corrective action: The last step in controlling process involves taking
corrective action whenever the deviation occurs beyond the permissible limits
so that they do not reoccur in future. However, the standards may be revised if
it is not possible to check deviations through corrective action.
Question :18
Anubhav has set up an export house after completing his masters in fashion
designing. As the quality of the garment depends on the quality of raw material
used, he assures that the fabric meets the requirements by conducting a series of
tests for the fabrics like shrinkage test, testing colour fastness to washing, colour
fastness to light, colour fastness to perspiration etc through laboratory tests. Later
on, at the production areas, fabric inspection is also conducted by stopping the
production process. The tests help to detect the deviations and also take corrective
action. Moreover, he ensures that complete training about production work was
given to every worker at the time of joining his export house.
Identify the function of management being performed by Anubhav by conducting
tests to assure for the quality of the garments manufactured in his export house.
Briefly explain the term ‘deviations.’
Give any three advantages of giving training to the employees.
Answer:
 Controlling is the function of management being performed by Anubhav by
conducting tests to assure for the quality of the garments manufactured in his
export house.
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 The term ‘deviations’ refers to the difference between the actual performance
and planned performance. If the actual performance is more than the planned
performance, it may be said to be positive in nature or vice-versa.
 The benefits of training and development to an organisation are as follows:
o Training imparts systematic learning to the employees thereby helping to avoid
wastage of efforts and money and is considered better than the hit and trial
method.
employee turnover.
Question :19
Raghav started a take away eating joint in a nearby market. His business was doing
well. He ensured that the food was properly cooked, a standard taste was
maintained, packing of food was done effectively and the orders were executed on
time. But unfortunately he met with an accident and was advised three months bed
rest. In his absence, his cousin Rohit took charge of his business. When he resumed
his work after three months, he realised that his clientele had dropped. The people
were not happy with the services as the quality of food had deteriorated and the
delivery time for orders had increased considerably. All this was happening because
most of his previous staff had left as Rohit used to adopt a very strict and
authoritative approach towards them.
List any two aspects about his business that Raghav was controlling in order to
make it successful.
Explain briefly any two points to highlight the importance of the controlling
function.
Name and explain the style of leadership adopted by Rohit.
Answer:
 The two aspects about his business that Raghav was controlling in order to
make it successful are listed below:
o A standard taste was maintained.
o The orders were executed on time.
 The two points that highlight the importance of the controlling function are
listed below:
 Judging accuracy of standards: The controlling function helps the business
managers to judge the objectivity and accuracy of the current standards. It also
216
assists in reviewing and revising the standards keeping in view the forthcoming
changes in both the internal and external environment of the business.
 Improving employee motivation: The controlling function seeks to motivate the
employees and helps them to give better performance. This is because it
makes them aware well in advance about what they are expected to do and
what the standards of performance are on the basis of which they will be
judged.
 Rohit had adopted an autocratic style of leadership. An autocratic leader
expects strict compliance from his subordinates with regard to the orders and
instructions given by him. Therefore, it involves only one-way communication.
Question :20
‘Saurashtra’ is a company involved in the export of indigenous food products like
chutneys and pickles. It has tied up with the small farmers in various states for
sourcing of fruits and vegetables. In this way it helps the small farmers to sell their
produce at reasonable rates. The company follows a practice where only significant
deviations from a budget or plan are brought to the attention of management. The
degree of deviations allowed in different categories in the budget are well defined
in advance, along with the appropriate levels of management who will respond to
the deviations in question. For example, a deviation of Rs. 20,000 or more in
purchase costs will be reported to the concerned department manager.
Identify the principle of management control adopted by the company. State the
belief underlying this principle.
List any two values that the company wants to communicate to the society.
Answer:
 Management by exception is the principle of management control adopted by
the company. It is based on the belief that ‘if you try to control everything, you
may end up controlling nothing’.
o Rural development
o Sense of responsibility
Question :21
Shruti has established a small scale factory after completing a course in textile
designing. She has tied up with the big home furnishing retail outlets in the city for
supplying to them good quality designer home furnishing products like bed covers,
cushions etc. She believes that controlling without planning is blind. So, every time
she gets an order, she sets the standards in terms of the number of personnel
217
required, the estimated requirements in man-hours per product, the requirements
of direct materials for the projected production and the amount of normal
overhead expenses required at the projected work-load. She also keeps a close
watch on the activities so as to ensure that they conform to plans. Whenever the
order size is too large, she hires extra workers by placing a notice on the notice-
board of the factory specifying the details of the jobs available.
Identify the functions of management being performed by Shruti.
Do you think Shruti is right in her thinking that, “controlling without planning is
blind.” Explain by bringing out the relationship between planning and controlling.
Name the source of recruitment adopted by Shruti. Also, mention its type.
Answer:
 The functions of management being performed by Shruti are Controlling and
Staffing.
 Yes, Shruti is right in thinking that, ” controlling without planning is blind.”
 Planning provides the basis of controlling by setting the standards in advance.
In the absence of these standards, managers will not know what all activities
have to be controlled. Planning is prescriptive in nature whereas controlling is
evaluative. Thus, planning and controlling are interrelated and interdependent
as planning is based on facts and makes controlling easier and effective
whereas controlling helps to improve future planning by providing valuable
information derived from the past experiences.
 The source of recruitment adopted by Shruti is Direct Recruitment. It is an
external source of recruitment.
Question :22
Vishesh works as an interior designer. He gets a contract to redesign a play school.
He employs three painters on the site assuming that an average painter will be able
to paint 10 desks in a day. At the end of the first day of their work, Vishesh finds
that the painter A, painter B and painter C have painted 12, 14 and 15 desks
respectively. On comparing the actual performance with the planned performance,
he realises that the standard set by him is too low. Consequently, he decides to
review and revise the standard and raise it.
Identify the function of management being performed by Vishesh.
“Planning and controlling are both backward looking as well as forward looking
functions.” Explain the statement with reference to the above paragraph.
Answer:
 Controlling is the function of management being performed by Vishesh.
218
 It is appropriate to say that, “Planning and controlling are both backward
looking as well as forward looking functions” as evident from the above case.
 Planning is considered as a forward looking function as plans are made for
future.
“assuming that an average painter will be able to paint 10 desks in a day.”
 Planning may be considered as a backward looking function because the
quality of planning can be improved with the help of valuable information
provided by controlling in terms of results achieved.
“On comparing the actual performance with the planned performance, he
realises that the standard set by him is too low.”
 Controlling is considered as a backward looking function as it is like the post
mortem of the past activities to ascertain the deviations if any.
“At the end of the first day of their work, Vishesh finds that the painter A,
painter B and painter C have painted 12, 14 and 15 desks respectively.”
 Controlling is considered as a forward looking function as it helps to improve
the future performance by providing guidance for taking corrective action so
that deviations do not reoccur in future.
“Consequently, he decides to review and revise the standard and raise it.
Question :23
A critical point control (CPC) approach is followed by McDonald in the cooking and
handling process so that any food safety threat can be prevented, eliminated, or
reduced to an acceptable level. Hence, continuous monitoring of activities are
undertaken to ensure that the process is right at each critical point control. The
main principle followed for cooking at McDonald is “less amount many time” which
can ensure the high quality and high fresh level of the food. For instance, if four
hamburgers have to be made, a worker cannot cook all the four hamburgers at one
time. The time figured out for making one hamburger is one hundred and forty-five
seconds. Moreover, nearly all foods in the McDonald have the specific holding time,
the holding time for hamburgers is ten minutes and for french fries is seven
minutes. If it is not sold within that time it is thrown away. Also, the temperature of
the milk sent by the supplier must be under 4° C, otherwise, it will be returned.
Name the steps involved in the controlling process which is being discussed in the
above lines.
What do you understand by ‘critical point control’? Explain.
How does the controlling function of management help in accomplishing
organisational .goals and ensure efficient use of resources?
219
Answer:
 Analysing deviation and taking corrective action are being discussed in the
above lines.
 Since it may neither be economical nor easy to monitor each and every activity
in the organisation, therefore, every organisation identifies ar\d states its
specific key result areas (KRAs) or critical points which require tight control are
on these points are attended to urgently by the management.
listed below:
o Accomplishing organisational goals: The controlling function helps in
accomplishing organisational goals by constantly monitoring the performance
of the employees and bringing to light the deviations, if any, and taking
appropriate corrective action.
o Making efficient use of resources: The controlling function enables the
managers to work as per predetermined standards. This helps to avoid any
ambiguity in business operations and reduce wastage and spoilage of resources
in the organisation.
Question :24
Babita Ltd. is engaged in manufacturing machine components. The target
production is 250 units per day per worker. The company had been successfully
attaining this target until two months ago. Over the last two months it has been
observed that daily production varies between 200-210 units per worker.
Name the function of management and identify the step in the process of this
function which helped in finding out that the actual production of a worker is less
than the set target.To complete the process of the function identified in (a) and to
ensure the
performance as per set targets, explain what further steps a manager has to take.
Answer:
 The management function is Controlling.
 “Comparing actual performance with standards” is the step involved in the
process of controlling which helped in finding out that the actual production of
a worker is less than the set target.
 A manager has to take the following two further steps to complete the process
of controlling:
o Analysing deviations
o Taking corrective action
220
•
Question :25
Rajeev and Sanjeev are managers in the same organization having different units.
While discussing about the function of management, Rajeev says “Planning is
looking ahead whereas controlling is looking back.” But Sanjeev says, “Planning is
looking back whereas controlling is looked ahead.” Both are giving reasons in favour
of their statements.
Explain the possible reasons given by both and justify who is correct.
Answer:
 Rajeev who says, “Planning is looking ahead whereas controlling is looking
back” must be giving the following reason:
 Sanjeev who says, “Planning is looking back where as controlling is looking
ahead” must be giving the following reasons.
 Conclusion: Planning and controlling are both backward looking and forward
looking functions. Hence, both of them are partially correct.
Question :26
'Saurashtra’ is a company involved in the export of indigenous food products like
chutneys and pickles. it has tied up with the small farmers in various states for
sourcing of fruits and vegetables. In this way it helps the small farmers to sell their
produce at reasonable rates. The company follows a practice where only significant
deviations from a budget or plan are brought to the attention of management. The
degree of deviations allowed in different categories in the budget are well defined
in advance, along with the appropriate levels of managements who will respond to
the deviations in question. For example, a deviation of Rs. 20,000 or more in
purchase costs will be reported to the
concerned department manager.
Identify the principle of management control adopted by the company. State the
belief underlying this principle.
Answer:
 Management by exception is the principle of management control adopted by
the company. It is based on the belief that ‘if you try to control everything, you
may end up controlling nothing.’
221
Question :27
Anubhav has set up an export house after completing his masters in fashion
designing. As the quality of the garment depends on the quality of raw materials
used, he assures that the fabric meets the requirements by conducting a series of
tests for the fabrics like shrinkage test, testing colour fastness to washing, colour
fastness to light, colour fastness to perspiration etc. through laboratory tests. Later
on, at the production areas, fabric inspection is also conducted by stopping the
production process. The tests help to detect the deviations and also take corrective
action. Moreover, the ensures that complete training about production work was
given to every worker at the time of joining his export house.
Identify the function of management being performed by Anubhav by conducting
tests to assure for the quality of the garments manufactured in his export house.
Briefly explain the term ‘deviations.’
Give any three advantages of giving training to the employees.
Answer:
 Controlling is the function of management being performed by Anubhav by
conducting tests to assure for the quality of the garments manufactured in his
export house.
 The term ‘deviations’ refers to the difference between the actual performance
and planning performance. If the actual performance is more than the planned
performance, it may be said to be positive in nature or vice-versa.
 The benefits of training of development to an organization are as follows:
o Training imparts systematic learning to the employees thereby helping to avoid
wastage of efforts and money and is considered better than the hit and trial
method.
employee turnover.
Question :28
Atul and Ajay are good friends. They decide to set up a digital printing press
together as both of them are compute wizards. They plan to offer various types of
printed products including labels, manuals, marketing material, memo pads,
business order forms, T-shirts, mugs etc. They set standards for every aspect of
their work in order to create an efficient working environment. As per the
standards, an average person types between 38 and 40 words per minute. Keeping
this in mind, they engage two typists Bitto and Raju and assign them work
222
accordingly. Within two days, they realize the output in terms of typing work done
by Raju is too less as compared to the desired output. On inspecting, Atul finds out
that Raju’s typing speed is between 18 and 20 words per minute only. But Raju
exhibits great skills in designing work and is a good human being. Hence, Atul and
Ajay decide to retain him for doing creative work and appoint a new typist.
Identify and explain the function of management being discussed here.
List the steps involved in the function of management as identified in part (a)
Also, quote the liens from the paragraph relating to each step.
Answer:
 Controlling is the function of management being discussed here.
 The steps involved in the process of controlling which are discussed in the
above paragraph are:
o Setting standards of performance:
o Measurement of actual performance:
o Comparison of actual performance with the standards:
o Analyzing deviations:
o Taking corrective action:
Question :29
D & D Ltd. is a large manufacturing unit. Recently, the company has conducted the
‘time’ and ‘motion’ studies and concluded that on an average a worker could
produce 120 units per day. However, it has been noticed that average daily
production of a worker is in the range of 80-90 units.
Which function of management is needed to ensure that the actual performance is
in accordance with the performance as per ‘time’ and ‘motion ‘studies? State four
features of this function of management.
Answer:
 Controlling
 Features of controlling:
o Controlling is a goal-oriented function
o Controlling is a pervasive function
o Controlling is a continuous process
o Controlling is both a backward looking as well as forward looking function.
Question :30
‘A.S. Ltd.’ is a large company engaged in assembly of air-conditioners. Recently the
average a worker can assemble ten air-conditioners in a day. The target volume of
223
the workers are happy. Even then the assembly of air-conditioners per day is i800
units only. To find out the reason the company compared actual performance of
each worker and observed through C.C.T.V. that some of the workers were busy is
gossiping.
2. State those steps in the process of the function identified which are discussed in
the above praragraph.
Answer:
 Controlling
 Steps discussed in the above paragraph are:
o Setting performance standards
o Measurement of actual performance
o Comparing actual performance with the standards
o Analyzing deviations for their causes.
Question :31
Alpha Ltd. was manufacturing Auto spare parts. To improve the efficiency of
employees the company provided training to their employees by inviting an expert
who demonstrated the whole process of manufacturing. The expert quoted that all
deviations cannot be controlled, so manager must know which deviation in key
areas must be attended urgently as compared to deviation in non-key area. He also
suggested that human beings are bound to brake mistakes as manager should not
take strict action on every minute mistake of workers, rather he can fix a range of
deviation and take action if deviation is above the specified large.
Identify the functions of management referred above.
Name the two ways of analyzing deviation mentioned above.
Name the method of training used by the company.
Answer:
 Staffing and controlling
1. critical Point Control
2. Management by exception
 Apprenticeship method of training
Question :32
A critical point control (CPC) approach is followed by McDonald in the cooking and
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handling process so that any food safety threat can be prevented, eliminated, or
reduced to an acceptable level. Hence, continuous monitoring of activities are
undertaken to ensure that the process is right at each critical point control. The
main principle followed for cooking at McDonald is “less amount many time”
which can ensure the high quality and high fresh level of the food. For instance, if
your hamburgers have to be made, a worker cannot cook all the four hamburgers
at one time. The time figured out for making one hamburger is one hundred and
forty-five seconds. Moreover, nearly all foods in the McDonald have the specific
holding time, the holding time for hamburgers is ten minutes and for French fries is
seven minutes. If it is not sold within that time it is thrown away. Also, the
temperature of the milk sent by the supplier must be under 4 0 c, otherwise, it will
be returned.
Name the steps involved in the controlling process which is being discussed in the
above lines.
What do you understand by ‘critical point control’? Explain.
How does the controlling function of management help in accomplishing
organizational goals and ensure efficient use of resources?
Answer:
 Analyzing deviation and taking corrective action are being discussed in the
above lines.
 Since it may neither be economical nor easy to monitor each and every activity
in the organization, there for every organization identifies and states its
specific key result area (KRAs) or critical points which require tight control are
on these points are attended to urgently by the management.
listed
 below:
o 1. Accomplishing organizational goals:
o 2. Making efficiently use of resources:
Question :33
Raghav started a takeaway eating joint in a nearby market. His business was doing
well. He ensured that the food was properly cooked, a standard taste was
maintained, packing of food was done effectively and the orders were executed on
time. But unfortunately, he met with an accident and was advised three months
bed rest. In his absence, his cousin Rohit took charge of his business. When he
resumed his work after three months, he realized that his clientele had dropped.
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The people were not happy with the services as the quality of food had
deteriorated and the delivery time for orders had increased considerably. All this
was happening because most of his previous staff had left as Rohit used to adopt a
very strict and authoritative approach towards them.
List any two aspects about his business that Raghav was controlling in order to
make it successful.
Explain briefly any two points to highlight the importance of the controlling
function.
Name and explain the style of leadership adopted by Rohit.
Answer:
 The two aspects about his business that Raghav was controlling in order to
make it successful are listed below:
o A standard taste was maintained.
o The orders were executed on time.
listed below:
o Judging accuracy of standards:
o Improving employee motivation:
 Rohit had adopted an autocratic style of leadership. An autocratic leader
expects strict compliance form his subordinates with regard to the orders and
instructions given by him. Therefore, it involves only one-way communication.
Question :34
Mr. Nath, a recently appointed production manager of Suntech Ltd. has decided to
produce jute bags instead of plastic bags as these are banned by the government.
He set a target of producing 1000 jute bags a day. It was reported that the
employees were not able to achieve the target. Mr. Nath’s behavior is good
towards the employees. His attitude is always positive. So he announced various
incentive schemes for the employees like.
- installing award or certificate for best performance.
- Rewarding an employee for giving valuable suggestions.
- Congratulating the employees for good performance.
Identify the functions of management highlighted in the above paragraph.
State the ‘incentive’ under which the employees are motivated.
Answer:
 1. Controlling and Directing
 2. Employee recognition programme (non-monetary incentive)
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Question :35
Joseph Bros. was a firm manufacturing jute lamp shades. It uses left over jute
pieces from various jute factories to manufacture economical lamp shades which
are supplied to various hotels in nearby towns: it employs men and women from
nearby villages as workers for creating good lamp shade designs. Joseph Bros., is
not able to meet its targets. Namish, the supervisor of the company, was
told to analyze the reasons for the poor performance. Namish found following
problems and suggested certain solution s in the working of the business. M the
number of workers employed was les than what was required for the work. As a
result, the existing workers were overburdened. The firm decided to search for
new workers and it asked the present employees to introduce candidates or
recommend their friends and relatives to the firm.
This enabled the firm in “putting people to jobs” and assured attainment of
objective according to plans.
Identify the functions of management being performed by the firm in the above
situation.
Name the concept and its source used by the firm to attract more workers for the
firm.
Answer:
 1. Staffing and Controlling
 2. Recruitment, External Source of Recruitment (Recommendations of
employees)
Question :36
A company was manufacturing ‘LED bulbs’ which were in great demand. It was
found that the target of producing 300 bulbs a day was not met by the employees.
On analysis, it was found that the workers were not at fault. Due to electricity
targets and alternative arrangements were needed. To meet the increased
demand, the company assessed that approximately 88 additional workers were
required out of which 8 would work as heads of different departments and 10
would work as subordinates under each head. The required qualifications and job
specifications were also enlisted. It was also decided that necessary relaxation
should be given to encourage women, persons from backward and rural areas and
persons with special abilities to assume responsible positions in the organization.
All efforts were made to match the ability of the applicants with the nature of
work.
Identify the functions of management discussed above.
State the two steps in the process of each function discussed in the above para.
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Answer:
 Staffing and controlling
 Step in Staffing
o Estimating manpower requirements:
o Recruitment:
o Steps in controlling:
o Comparison of actual performance with the standards:
o Analyzing deviations:
o Taking corrective action:
Question :37
Airtech Ltd. is manufacturing mobile phones both for domestic Indian market as
well as for export. It has enjoyed a substantial market share and also had a loyal
customer following. But lately it has been experiencing problems because its targets
have not been met with regard to sales and customer satisfaction. Also, mobile
market in India has grown tremendously and new players have come with better
technology and pricing. This is causing problems for the company. It is planning to
revamp its controlling system and take other steps necessary to rectify the
problems ikt is facing. It also decides to offer its basis models of mobile phones at
50% discount to the poor people.
State any two benefits the company with derive from a good control system.
How can the company relate its planning with control in this line of business to
ensurethat its plan are actually implemented and targets attained?
Give the steps that the company should follow to remove the problems it is facing.
Answer:
 Two benefits which the company will derive from a good control system are:
o Accomplishing organizational goals of increasing market share and customer
satisfaction.
o Making efficient use of resources by controlling wastage and spoilage of
resources; and ensuring that each activity is performed according to the
predetermined standards.
 Controlling will improve future planning by providing information to the
company derived from past experience that its targets were not met with
regard to sales and customer satisfaction.
 The company should undertake technological up gradation of machinery, and
modify the existing process so that cost is reduced and the company can set
lower price for its mobile phones to bet its competitors.
Question :38
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You are the manager of Bharti Chemicals Ltd. it is reported to you that postal
expenses have increased by 10% over standard rates and cost of raw materials has
increased by 2%. Which of the two deviations will be more critical to you?
Answer:
 Increase in cost of raw materials by 2% is more critical. (Critical Point Control)
Question :39
Surbhi Ltd. produces safety pins on a mass scale. The company’s policy is that at
most 25 of the daily production could be defective. Over a three months period, it
has been
observed that 8% - 10% of the production is defective. The cause of deviation found
is defective machinery. What corrective action should be taken by the
management?
Answer:
 Repair the existing machine or replace the machine if it cannot be repaired.
Question :40
K&K Co. Ltd. is engaged in manufacturing of machine components. The target of
production is 200 units daily. The company had been successfully attaining this
target until two months ago. Over the last two months it has been observed that
daily production varies between 150-170 units.
Identify the possible causes for the decline in production and the steps to be taken
to achieve the desired targets.
Answer:
 The possible causes for decline in production are-
o There may be some defect in machinery by which the components are
produced.
o Employees are not performing efficiently.
o Sometimes employees may become lethargic.
o The company can take the following steps to achieve the desired targets-
o Company can replace the machinery or get repaired, if fault is in machine.
o If employees are not performing efficiently, the company can give training to
employees.
o If employees are becoming lethargic,the company needs to keep a close
supervision on their employees.
Question :41
Hina Sweets is a renowned name for quality sweets since 1935. Harsh the owner of
Hina Sweets was worried as the sales had declined during the last three months.
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When he enquired from the Sales Manager, the Sales Manager reported that there
were some complaints about the quality of sweets. Therefore Harsh ordered for
sample checking of sweets.Identify the step taken by Harsh that is related to one of
the functions of management.
Answer:
 Measurement of actual performance is the step in controlling process being
described.
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Chapter 9 Financial Management
Question :1
“A business that doesn’t grow dies”, says Mr. Shah, the owner of Shah Marble Ltd.
with glorious 36 months of its grand success having a capital base of RS.80 crores.
Within a short span of time, the company could generate cash flow which not only
covered fixed cash payment obligations but also create sufficient buffer. The
company is on the growth path and a new breed of consumers is eager to buy the
Italian marble sold by Shah Marble Ltd. To meet the increasing demand, Mr. Shah
decided to expand his business by acquiring a mine. This required an investment of
RS.120 crores. To seek advice in this matter, he called his financial advisor Mr. Seth
who advised him about the judicious mix of equity (40%) and Debt (60%). Mr. Seth
also suggested him to take loan from a financial institution as the cost of raising
funds from financial institutions is low. Though this will increase the financial risk
but will also raise the return to equity shareholders. He also apprised him that
issue of debt will not dilute the control of equity shareholders. At the same time,
the interest on loan is a tax-deductible expense for computation of tax liability.
After due deliberations with Mr. Seth, Mr. Shah decided to raise funds from a
financial institution.
Identify and explain the concept of Financial Management as advised by Mr. Seth
in the above situation.
State the four factors affecting the concept as identified in part (1) above which
have been discussed between Mr. Shah and Mr. Seth.
Answer:
 Capital structure is the concept of Financial Management as advised by Mr.
Seth in the above situation. Capital structure refers to the mix between owners
funds and borrowed funds.
 The four factors affecting capital structure which have been discussed between
Mr. Shah and Mr. Seth are explained below:
o Cashflow position: The issue of debt capital involves a fixed burden on the
company in the form of payment of interest and repayment of capital.
Therefore, if the cash flow position of a company is good it may issue debt else
equity to raise the required amount of capital.
o Risk Consideration: Financial risk refers to a situation when a company is
unable to meet its fixed financial charges. Financial risk of the company
increases with the higher use of debt. This is because issue of debt involves
fixed commitment in terms of payment of interest and repayment of capital.
o Tax rate: Considering the fact that amount of interest paid is a deductible
expense, cost of debt is affected by the tax rate. If for example a firm is
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borrowing @ 10% and the tax rate is 30%, the after-tax cost of debt is only 7%.
Therefore, when the tax rate is higher it makes debt relatively cheaper and
increases its attraction vis-a-vis equity.
o Control: The issue of debentures doesn’t affect the control of the equity
shareholders over the business as the debenture holders do not have the right
to participate in the management of the business.
Question :2
Shalini, after acquiring a degree in Hotel Management and Business
Administration, took over her family food processing company of manufacturing
pickles, jams and squashes. The business had been established by her great
grandmother and was doing reasonably well. However, the fixed operating costs of
the business were high and the cash flow position was weak. She wanted to
undertake modernisation of the existing business to introduce the latest
manufacturing processes and diversify into the market of chocolates and candies.
She was very enthusiastic and approached a finance consultant, who told her that
approximately ? 50 lakh would be required for undertaking the modernisation and
expansion programme. He also informed her that the stock market was going
through a bullish phase.
Keeping the above considerations in mind, name the source of finance Shalini
should not choose for financing the modernisation and expansion of her food
processing business. Give one reason in support of your answer.
Explain any two other factors, apart from those stated in the above situation,
which Shalini should keep in mind while taking this decision.
Answer:
 Shalini should not choose debt capital for financing the modernisation and
expansion of her food processing business because the fixed operating cost of
the company is high. It cannot take the additional burden of fixed
commitments in terms of payment of interest and repayment of capital by
issuing debt.
 The other two factors that Shalini must keep in mind while taking this decision
are stated below:
o Risk: Financial risk refers to a situation when a company is unable to meet its
fixed financial charges. Financial risk of the company increases with the higher
use of debt. This is because issue of debt involves fixed commitment in terms
of payment of interest and repayment of capital.
o Flexibility: Too much dependence on debt reduces the firm’s ability to raise
debt during unexpected situations. Therefore, it should maintain flexibility by
not using debt to its full potential.
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Question :3
Radhika and Vani who are young fashion designers, left their job vyith a famous
fashion designer chain to set-up a company ‘Fashionate Pvt. Ltd.’ They decided to
run a boutique during the day and coaching classes for the entrance examination
of National Institute of Fashion Designing in the evening. For the coaching centre,
they hired the first floor of a nearby building. Their major expense was the money
spent on photocopying of notes for their students. They thought of buying a
photocopier knowing fully that their scale of operations was not sufficient to make
full use of photocopier.
In the basement of the building of Fashionate Pvt. Ltd, Praveen and Ramesh were
carrying on a printing and stationery business in the name of ‘Neo Prints Pvt. Ltd.’
Radhika approached Praveen with the proposal to buy a photocopier jointly which
could be used by both of them without making separate investment. Praveen
agreed to this.
Identify the factor affecting the fixed capital requirements of Fashionate Pvt. Ltd.
Answer:
 The factor affecting the fixed capital requirement of Fashionable Pvt. Ltd. is the
level of collaboration. This kind of arrangement of using the resources jointly
helps to reduce the fixed capital requirements of the business firms.
Question :4
Somnath Ltd. is engaged in the business of export of garments. In the past, the
performance of the company had been upto the expectations. In line with the
latest technology, the company decided to upgrade its machinery. For this, the
Finance Manager, Dalmia estimated the amount of funds required and the timings.
This will help the company in linking the investment and the financing decisions on
a continuous basis. Dalmia therefore, began with the preparation of a sales
forecast for the next four years. Fie also collected the relevant data about the
profit estimates in the coming years. By doing this, he wanted to be sure about the
availability of funds from the internal sources of the business. For the remaining
funds he is trying to find out alternative sources from outside.
Identify the financial concept discussed in the above para. Also state the objectives
to be achieved by the use of financial concept, so identified.
Answer:
 Financial planning is the financial concept discussed in the above paragraph.
The process of estimating the fund requirements of a business and specifying
the sources of funds is called financial planning. It relates to the preparation of
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a financial blueprint of an organisation’s future operations. The objectives to
be achieved by the use of financial concept are stated below:
 To ensure availability of funds whenever required which involves estimation of
the funds required, the time at which these funds are to be made available and
the sources of these funds.
 To see that the firm does not raise resources unnecessarily as excess funding is
almost as bad as inadequate funding. Financial planning ensures that enough
funds are available at right time.
Question :5
Ramnath Ltd. is dealing in import of organic food items in bulk. The company sells
the items in smaller quantities in attractive packages. Performance of the company
has been up to the expectations in the past. Keeping up with the latest packaging
technology, the company decided to upgrade its machinery. For this, the Finance
Manager of the company, Mr. Vikrant Dhull, estimated the amount of funds
required and the timings. This will help the company in linking the investment and
the financing decisions on a continuous basis.
Therefore, Mr. Vikrant Dhull began with the preparation of a sales forecast for the
next four years. He also collected the relevant data about the profit estimates in
the coming years. By doing this, he wanted to be sure about the availability of
funds from the internal sources. For the remaining funds he is trying to find out
alternative sources.
Identify the financial concept discussed in the above paragraph. Also, state any
two points of importance of the financial concept, so identified.
Answer:
 Financial planning is the financial concept discussed in the above paragraph.
The process of estimating the fund requirements of a business and specifying
the sources of funds is called financial planning. It relates to the preparation of
a financial blueprint of an organisation’s future operations.
 The two points highlighting the importance of planning are described below:
o It ensures smooth running of a business enterprise by ensuring availability of
funds at the right time.
o It helps in anticipating future requirements of a funds and evading business
shocks and surprises.
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Question :6
Rizul Bhattacharya, after leaving his job, wanted to start a Private Limited
Company with his son. His son was keen that the company may start
manufacturing mobile-phones with some unique features. Rizul Bhattacharya felt
that mobile phones are prone to quick obsolescence and a heavy fixed capital
investment would be required regularly in this business. Therefore, he convinced
his son to start a furniture business.
Identify the factor affecting fixed capital requirements which made Rizul
Bhattacharya choose the furniture business over mobile phones.
Answer:
 The factor affecting the fixed capital requirements which made Rizul
Bhattacharya choose the furniture business over mobile phones is
technological upgradation.
Question :7
Tata International Ltd. earned a net profit of Rs. 50 crores. Ankit, the finance
manager of Tata International Ltd. wants to decide how to appropriate these
profits. Discuss any five factors which will help him in taking this decision.
Answer:
 The five factors which will help Ankit, in taking the dividend decision are
described below:
o Earnings: Since the dividends are paid out of current and past earnings, there is
a direct relationship between the amount of earnings of the company and the
rate at which it declares dividend. If the earnings of the company are high, it
may declare a higher dividend or vice-versa.
o Cash flow position: Since the dividends are paid in cash, if the cash flow
position of the company is good it may declare higher dividend or vice-versa.
o Access to capital market: If the company enjoys an easy access to capital
market because of its credit worthiness. It does not feel the need to depend
entirely on retained earnings to meet its financial needs. Hence, it may declare
higher dividend or vice-versa.
o Growth prospects: If the company has any forthcoming investment
opportunities, it may like to retain profits to finance its expansion projects. This
is because retained profits is considered to be the cheapest source of finance
as it doesn’t involve any explicit costs. Hence, it may declare lower dividend or
vice-versa.
o Preferences of the shareholders: The companies paying stable dividends are
always preferred by small investors primarily if they want regular income in the
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form of ‘stable returns’ from their investments. Large shareholders may be
willing to forgo their present dividend in pursuit of higher profits in future.
Therefore, the preferences of the shareholders must be taken into
consideration.
Question :8
Amit is running an ‘advertising agency’ and earning a lot by providing this service
to big industries State whether the working capital requirement of the firm will be
‘less’ or ‘more’. Give reason in support of your answer
Answer:
 The working capital requirements of Amit will be relatively less as he is running
an advertising agency, wherein there is no need to maintain inventory.
Question :9
Yogesh, a businessman, is engaged in the purchase and sale of ice-creams. Identify
his working capital requirements by giving reasons to support your answer. Now,
he is keen to start his own ice-cream factory. Explain any two factors that will
affect his fixed capital requirements.
Answer:
 The working capital requirements of Yogesh will be less as he is engaged in
trading business.
 The two factors that will affect his fixed capital requirements when he will start
his own ice-cream factory are described below:
o Level of collaboration: If Yogesh gets an opportunity to set up his factory in
collaboration with another enterprise, his fixed capital requirements will
reduce considerably else his fixed capital requirements will be more.
o Financial alternatives available: If Yogesh is able to get the place to start the
factory and machinery on lease, his fixed capital requirements will reduce
considerably. Whereas if he decides to purchase them, his fixed capital
requirements will be more.
Question :10
Amar is doing his transport business in Delhi. His buses are generally used for
tourists going to Jaipur and Agra. Identify the working capital requirements of
Amar. Give reasons to support your answer. Further, Amar wants to expand and
diversify his transport business. Explain any two factors that will affect his fixed
capital requirements.
Answer:
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 The working capital requirements of Amar will be relatively less as he is
engaged in prtividing transport services wherein there is no need to maintain
inventory.
 The factors affecting the fixed capital needs of his business are as follows:
o Diversification: If a business enterprise plans to diversify into new product
lines, its requirement of fixed capital will increase.
o Growth prospects: If a business enterprise plans to expand its current business
operations in the anticipation of higher demand, consequently, more fixed
capital will be needed by it.
Question :11
Manish is engaged in the business of manufacturing garments. Generally, he used
to sell his garments in Delhi. Identify the working capital requirements of Manish
giving reason in support of your answer. Further, Manish wants to expand and
diversify his garments business. Explain any two factors that will affect his fixed
capital requirements.
Answer:
 The working capital requirements of Manish will be relatively more as he is
engaged in the business of manufacturing garments. This is because the length
of production cycle is longer i.e. it takes time to convert raw material into
finished goods.
o Scale of Operations: The amount of fixed capital required by a business
enterprise is directly proportionate to its scale of operations. Therefore, if
Manish plans to do business on a large scale, his fixed capital requirements will
be more or vice versa.
o Technological Upgradation: If Manish plans to use machines of latest
technology in manufacturing garments, his fixed capital requirements will be
more as replacement of obsolete machines will require huge financial outlay.
Question :12
Harish is engaged in the warehousing business and his warehouses are generally
used by businessmen to store fruits. Identify the working capital requirements of
Harish giving reasons in support of your answer. Further, Harish wants to expand
and diversify his warehousing business. Explain any two factors that will affect his
fixed capital requirements.
Answer:
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 The working capital requirements of Harish will be relatively less as he is
engaged in providing warehousing services wherein there is no need to
maintain inventory.
o Scale of Operations: The amount of fixed capital required by a business
enterprise is directly proportionate to its scale of operations. Therefore, if
Harish plans to do business on a large scale his fixed capital requirements will
be more or vice versa.
Question :13
Arun is a successful businessman in the paper industry. During his recent visit to his
friend’s place in Mysore, he was fascinated by the exclusive variety of incense
sticks available there. His friend tells him that Mysore region is known as a pioneer
in the activity of Agarbathi manufacturing because it has a natural reserve of forest
products especially Sandalwood to provide for the base material used in
production. Moreover, the suppliers of other types of raw material needed for
production follow a liberal credit policy and the time required to manufacture
incense sticks is relatively less. Considering the various factors, Arun decides to
venture into this line of business by setting up a manufacturing unit in Mysore.
Identify and explain the type of financial decision taken by Arun.
Identify the three factors mentioned in the paragraph which are likely to affect the
working capital requirements of his business.
Answer:
 Investment decision has been taken by Arun. Investment decision seeks to
determine as to how the firm’s funds are invested in different assets. It helps
to evaluate new investment proposals and select the best option on the basis
of associated risk and return. Investment decision can be long term or short-
term. A long-term investment decision is also called a Capital Budgeting
decision
 The three factors mentioned in the paragraph which are likely to reduce the
working capital requirements of his business are as follows:
o Availability of raw material: As there is easy availability of Sandalwood, which is
used as the base material for production, the working capital requirements of
his business will be less as there is no need to stock the raw materials.
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o Production cycle: The production cycle is shorter and less time is required to
manu¬facture incense sticks. Thus, the working capital requirements of his
business will be low.
o Credit availed: Due to the fact that the suppliers of other types of raw material
needed for production follow a liberal credit policy, the business can be
operated on minimum working capital.
Question :14
‘Adwitiya’ is a company enjoying market leadership in the food brands segment.
It’s portfolio includes three categories in the Foods business namely Snack Foods,
Juices and Confectionery. Keeping in line with the growing demand for packaged
food it now plans to introduce Ready- To-Eat Foods. Therefore, the company has
planned to undertake investments of nearly Rs. 450 crores for its new line of
business. As per the current financial report, the interest coverage ratio of the
company and return on investment is higher. Moreover, the corporate tax rate is
high.
As a financial manager of the company, which source of finance will you opt for
debt or equity, to raise the required amount of capital? Explain by giving any two
suitable reasons in support of. your answer.
Why are the shareholder’s of the company like to gain from the issue of debt by
the company?
Answer:
 As a financial manager of the company, I will opt for debt to raise the required
amount of capital.
 I support my decision by giving the following reasons:
 Interest coverage ratio: The interest coverage ratio of the company is high so it
can easily meet its fixed commitment of payment of interest and repayment of
capital.
 Tax rate: The tax rate is high which makes debt relatively cheaper as the
amount of interest paid on debt is treated as a tax deductible expense.
 The shareholders of the company are likely to gain from the issue 6f debt by
the company because the return on investment is higher. It helpS a company to
take advantage of trading on equity to increase the earnings per share.
Question :15
Computer Tech Ltd.,is one of the leading information technology outsourcing
services providers in India. The company provides business consultancy and
outsourcing services to its clients. Over the past five years the company has been
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paying dividends at high rate to its shareholders. However, this year, although the
earnings of the company are high, its liquidity position is not so good. Moreover,
the company plans to undertake new ventures in order to expand its business.
In context of the above case: .
Give any three reasons because of which you think Computer Tech Ltd. has been
paying dividends at high rate to its shareholders over the past five years.
Comment upon the likely dividend policy of the company this year by stating any
two reasons in support of your answer.
Answer:
 Computer Tech Ltd. has been paying dividends at high rate to its shareholders
over the past five years because of the following reasons:
o Earnings: The earnings of the company have been high. Since the dividends are
paid out of current and past earnings, there is a direct relationship between
the amount of earnings of the company and the rate at which it declares
dividend .
o Cashflow position: The cash flow position of the company must have been
good as in order to pay high dividends, more cash is required.
o Access to capital market: Because of its credit worthiness, the company
enjoyed an easy access to capital market. Therefore, it did not feel the need to
depend entirely on retained earnings to meet its financial needs. Hence, it
declared higher dividends in past.
 This year the company is likely to follow a conservative dividend policy because
of the following reasons:
o The cash flow position of the company is not good and dividends are paid in
cash.
o The company may like to retain profits to finance its expansion projects.
Retained profits do not involve any explicit cost and are considered to be the
cheapest source of finance.
Question :16
Bhuvan inherited a very large area of agricultural land in Haryana after the death
of his grandfather. He plans to sell this piece of land and use the money to set up a
small scale paper factory to manufacture all kinds of stationary items from
recycled paper. Being an amateur in business, he decides to consult his friend
Subhash who works in a financial consultancy firm. Subhash helps him to prepare a
blue print of his future business operations on the basis of sales forecast in next
five years. Based on these estimates, he helps Bhuvan to assess the fixed and
working capital requirements of business.
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Identify the type of financial service that Subhash has offered to Bhuvan.
Briefly state any four points highlighting the importance of the type of financial
service
identified in part (1).
Answer:
 Financial planning is the type of financial service that Subhash has offered to
Bhuvan.
 The four points highlighting the importance of financial planning are as follows:
o It ensures smooth running of a business enterprise by ensuring availability of
funds at the right time.
o It helps in anticipating future requirements of a funds and evading business
shocks and surprises.
o It facilitates co-ordination among various departments of an enterprise like
marketing and production functions, through well-defined policies and
procedures.
o It increases the efficiency of operations by curbing wastage of funds,
duplication of efforts, and gaps in planning.
Question :17
‘Madhur Milan’ is a popular online matrimonial portal. It seeks to provide
personalized match making service. The company has 80 offices in India, and is
now planning to open offices in Singapore, Dubai and Canada to cater to its
customers beyond the country. The company has decided to opt for the sources of
equity capital to raise the required amount of capital.
Identify and explain the type of risk which increases with the higher use of debt.
Explain briefly any four factors because of which you think the company has
decided to opt for equity capital.
Answer:
 Financial risk of the company increases with the higher use of debt. This is
because issue of debt involves fixed commitment in terms of payment of
interest and repayment of capital. Financial risk refers to a situation when a
company is unable to meet its fixed financial charges.
 The factors because of which the company has decided to opt for equity capital
are as follows:
o Capital market conditions: The state of capital market is bullish, so people are
likely to invest more in equity.
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o Fixed operating cost: The fixed operating cost of company is high so it cannot
take the further burden fixed commitment in terms of payment of interest and
repayment of capital by issuing debt.
o Cashflow position: The cash flow position of the company is weak so it cannot
meet the fixed obligations involved in issue of debt.
o Risk: The proportion of debt in its capital structure is already high so it cannot
issue further debt, thereby endangering the solvency of the company.
Question :18
Wooden Peripheral Pvt. Ltd. is counted among the top furniture companies in
Delhi. It is known for offering innovative designs and high quality furniture at
affordable prices. The company deals in a wide product range of home and office
furniture through its eight showrooms in Delhi. The company is now planning to
open five new showrooms each in Mumbai and Bangalore. In Bangalore it intends
to take the space for the showrooms on lease whereas for opening showrooms in
Mumbai, it has collaborated with a popular home furnishing brand, ‘Creations.’
Identify the factors mentioned in the paragraph which are likely to affect the fixed
capital requirements of the business for opening new showrooms both in
Bangalore and Mumbai separately,
“With an increase in the investment in fixed assets, there is a commensurate
increase in the working capital requirement.” Explain the statement with reference
to the case above.
Answer:
 The fixed capital requirements of Wooden Peripheral Pvt. Ltd. for opening new
showrooms in Bangalore will be relatively less as its taking space on lease, so
only rentals have to be paid.
 Similarly, its fixed capital requirement for opening showrooms in Mumbai will
be reduced as its going to share the costs with another company through
collaboration.
 It’s true that,” With an increase in the investment in fixed assets, there is a
commen¬surate increase in the working capital requirement.” Like in the
above case, Wooden Peripheral Pvt. Ltd. is planning to invest in new
showrooms. Consequently, its requirement of working capital will increase as it
will need more money to stock goods, pay electricity bills and salaries to staff.
Also, it intends to take the space for the showrooms in Mumbai on lease so it
will have to pay rentals.
Question :19
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‘Apparels’ is India’s second largest manufacturer of branded Lifestyle apparel. The
company now plans to diversify into personal care segment by launching
perfumes, hair care and skin are products. Moreover, it is planning to open ten
exclusive retail outlets in various cities across the country in next two years.
Identify the two factors affecting the fixed capital needs of the company by
quoting lines from the paragraph.
Why is the management of fixed capital considered to be an important for a
business?
Answer:
 The factors affecting the fixed capital needs of the company are as follows:
o Growth prospects: If a business enterprise plans to expand its current business
operations in the anticipation of higher demand, consequently, more fixed
capital will be needed by it.
 The management of fixed capital is considered important because:
o It affects the growth and profitability of business in future.
o It involves huge investment outlay in terms of investment in land, building,
machinery etc.
o It influences the overall level of business risk of the organisation.
o If these decisions are reversed, they may lead to major losses.
Question :20
After persuing a course in event management, Kajal and her brother Kamal
promoted an event management company under the name Khushi Entertainment
Private Limited. They strive together as dedicated and dynamic professionals
managing different kinds of formal and informal events across all major cities in
India and abroad. They design the event idea and co-ordinate the different aspects
of the event to make it a grand success. As a policy, they take fifty percent of the
payment as advance from the client before the start of an event and receive the
balance charges after the successful completion of the event.
Comment upon the working capital needs of the company keeping in mind its
nature of business.
Identify the other factor mentioned in the paragraph which is likely to affect the
working capital requirement of their business.
Answer:
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 The working capital requirements of Khushi Entertainment Private Limited will
be relatively less as they are engaged in providing event management services,
wherein there is no need to maintain inventory
 The other factor mentioned in the paragraph which is likely to affect the
working capital requirement of their business is ‘Credit availed.’ Since as a
policy, they take fifty percent of the payment as advance from the client before
the start of an event, their requirement of working capital is reduced.
Question :21
Storage Solution Ltd. is a large warehousing network company operating. through
a chain of warehouses at 40 different locations across India. The company now
intends to undertake computerisation of its owned ware houses as it seeks to
provide better value added and cost effective solutions for scientific storage and
preservation services to the market participants dealing in agricultural products
including farmers, traders, etc.
How is the decision to undertake computerisation of owned warehouses likely to
affect the fixed capital requirements of its business?
Name any two sources that company may use to finance the implementation of
this plan.
Answer:
 The decision to undertake computerisation of owned warehouses will increase
the fixed capital requirements of its business both in present and future as
after sometime, the technology being used will become obsolete and need
upgradation.
 The company may use retained earnings and take loans from financial
institutions to implement this plan.
Question :22
Visions Ltd. is a renowned multiplex operator in India. Presently, it owns 234
screens in 45 properties at 20 locations in the country. Considering the fact that
the there is a growing trend among the people to spend more of their disposable
income on entertainment, two years back the company had decided to add more
screens to its existing set up and increase facilities to enhance leisure, food chains
etc. It had then floated an initial public offer of equity shares in order to raise the
desired capital. The issue was fully subscribed and paid. Over the years, the sales
and profits of the company have increased tremendously and it has been declaring
higher dividend and the market price of its shares has increased manifolds.
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Name the different kinds of financial decisions taken by the company by quoting
Do you think the financial management team of the company has been able to
achieve its prime objective? Why or why not? Give a reason in support of your
answer.
Answer:
 The different kinds of financial decisions taken by the company are as follows:
o Investment decision: “Two years back the company had decided to add more
screens to its existing set up and increase facilities to enhance leisure, food
chains etc.”
o Financing decision: “It had then floated an initial public offer of equity shares in
order to raise the desired capital.”
o Dividend decision: “Over the years, the sales and profits of the company have
increased tremendously and it has been declaring higher dividend.”
 Yes, the financial management team of the company has been able to achieve
its prime objective i.e. wealth maximisation of the shareholders by maximising
the market price of the shares of the company.
Question :23
After completing his education in travel and tourism, Arjun started Travel Angels
Pvt. Ltd. along with his twin brother Bheem. Their company seeks to provide travel
solutions to its clients like ticket booking for airways, railways and road ways, hotel
booking, insurance etc. Although the business is doing well both of them have
realised that they are not good in managing finance, and feel confused and
frustrated sometimes due to financial crises that may suddenly arise. In order to
avoid such situations in the future, they hire Nakul and Sehdev as financial
managers, who have done a degree certification course in financial management.
In context of the above
Give the meaning of financial management.
Outline the role of Nakul and Sehdev as the financial management team of the
Travel Angels Pvt. Ltd. by giving any four suitable points.
Answer:
 Financial Management is concerned with optimal procurement as well as usage
of finance.
 Nakul and Sehdev will play a very important role as the financial management
team of the Travel Angels Pvt. Ltd. in managing the financial health of the
company:
 To determine the capital requirements of business both long-term and short
term.
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 To determine the capital structure of the company and determine the sources
from where required capital will be raised keeping in view the risk and return
matrix.
 To ensure efficient management of cash in order to ensure both liquidity and
profitability.
 To exercise overall financial control in order to promote s’afety, profitability
and conservation of funds.
Question :24
Wireworks Ltd. is a company manufacturing different kinds of wires. Despite fierce
competition in the industry, it has been able to maintain stability in its earnings
and as a policy, uses 30% of its profits to distribute dividends. The small investors
are very happy with the company as it has been declaring high and stable dividend
over past five years.
State any one reason because of which the company has been able to declare high
dividend by quoting line from the paragraph.
Why do you think small investors are happy with the company for declaring stable
dividend?
Answer:
 Stability in earnings: The company has been able to declare high dividend
because its earnings are stable.
 “Despite fierce competition in the industry, it has been able to maintain
stability in its earnings.”
 The small investors are happy with the company for declaring stable dividend
as they enjoy a regular income on their investment.
Question :25
Manoj is a renowned businessman involved in export business of leather goods. As
a responsible citizen, he chooses to use jute bags for packaging instead of plastic
bags. Moreover, on the advice of his friends, he decides to use jute for
manufacturing aesthetic handicrafts, keeping in view the growing demand for
natural goods. In order to implement his plan, after conducting a feasibility study,
he decides to set up a separate manufacturing unit for producing varied jute
products.
Identify the type of investment decision taken by Manoj by deciding to set up a
separate manufacturing unit for producing jute products.
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State any two factors that he is likely to consider while taking this decision
Answer:
 Capital budgeting decision has been taken by Manoj.

 The factors affecting Capital Budgeting Decision are as follows:
o Cash inflows: The expected cash inflows from the proposed projects should be
carefully analysed and the project indicating higher cash inflows should be
selected.
o Rate of return: The expected rate of return should be carefully studied in terms
of risk associated from the proposed project. If two projects are likely to offer
the same rate of return, the project involving lesser risk should be selected.
Question :26
Khoobsurat Pvt. Ltd. is the largest hair salon chain in the Delhi, with over a
franchise of 200 salons. The company is now planning to set up a manufacturing
unit in Faribadad for production of various kinds of beauty products under its own
brand name.
Comment upon the fixed capital needs of the company.
How will the requirement of fixed capital of the company change when it
implements its plan to set up a manufacturing unit?
Answer:
 The fixed capital needs of the company are low as its salons have been
promoted in the form of franchises.
 The requirement of fixed capital of the company will increase when it
implements its plan to set up a manufacturing unit because it will have to make
investments in buying land, building, machinery etc.
Question :27
Ramit is using ICR (Interest Coverage Ratio) as the indicator of the interest paying
capacity of his company. However one of his old school days’ friends Shobhit tells
him to use DSCR (Debt Service Coverage Ratio) as the indicator to judge it.
Do you agree with his friend?
Give reason for your answer.
Answer:
 Yes, I agree with him.
 As it is a better indicator of company’s ability to pay fixed financial charges like
interest because it completes the shortcoming in ICR. ICR is unable to show the
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situation of cash balance whereas in DSCR cash profits generated by the
operations are compared with the total cash required for the service of the
debt.
 ICR is the simple ratio of EBIT/Interest.
Question :28
Identify in the following cases factor affecting the choice of capital:
1. Raj an has an option of taking loan from his relatives. These people have
assured him to give loan at a low interest rate. So he decides to use debt as
a source of financing his project. Now he goes to different relatives and
friends to see if he can get a cheaper source of debt with even lower rate of
interest.
2. Prerak Iron Ltd. is thinking of raising finance to further its projects overseas.
For this the company is observing the other companies’ raising of finance.
Their debt-equity ratios are being thoroughly studied by the financial
experts of the company.
3. A company is trying to raise funds after consulting the experts. The owner of
the company has decided to find out the banks which can grant loan under
norms. He will assure that all norms are followed by the company. He has
also decided to gain knowledge about the SEBI guidelines related to public
issues of shares and debentures.
4. The management of a company is very much concerned about the latest
happenings in the stock market. They always w’ant to know whether the
conditions in the stock market are bullish or bearish so that they may know
the feasible time to grow money by issue of shares.
5. A firm has decided not to issue equity this year. The reason they have given
is the involvement of costs like printing charges, brokerage, advertising costs
and underwriter’s commission. The company says all these costs will add on
to become substantial.
6. A company already has high fixed operation costs. If it takes loan its fixed
financial costs will increase leading to an overall increase in payments. Had
the situation been opposite it would have considered taking loan but now
the only option is to go for equity.
7. A company is thinking of taking debt to meet its finance requirements. It is
thinking so because interest is a tax deductible expense. Due to the new
budget by the government raising debt has become comparatively cheaper
and equity is losing its attractiveness.
8. Madam Sharma has a company having 10 branches throughout the country.
He is thinking of opening a new branch. For this he requires a good amount
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of investment. He talks to his friends, banks and other sources to raise debt
as a source of finance. However, he prevents himself from using all possible
sources of finance so that he can maintain his borrowing power.
9. A leading company decides to raise fund. It decides to go for debt as the
source of finance. The reason behind this choice is the possibility of losing
management’s holding in the company if equity is issued. The company
already has been using equity as a source of finance during last couple of
years.
10. A company is no more interested in raising funds in the form of debt. The
amount of EBIT that the company has is decreasing in relation to the amount
of interest it has to pay on the debt it has borrowed. If it borrows more of
debt than this ratio EBIT/ Interest will further go down.
11. Neelam has decided to consider debt as the source of raising finance. Her
decision has come after considering the strong buffer of funds she already
has. She has enough amount of funds to cover fixed cash payments. Her
business unit has no problem in running normal business operation and it
has low business risk. Further the financial risk is also low.
12. A company has decided to go for trading on equity as an option. This is being
done to increase the Earning per Share (EPS). Definitely the ability of the
company to use debt is greater.
Answer:
1. Cost of debt
2. Capital structure of other companies
3. Regulatory framework
4. Stock market conditions
5. Floatation costs
6. Risk consideration
7. Tax rate (As with the new budget the tax rate has increased)
8. Flexibility
9. Control
10. Interest Coverage Ratio (ICR)
11. Cash flow position
12. Return on Investment (RoI)
Question :29
Future Business’ is in whole sale business. The manager in charge is taking care of
all the operations. The branch in Delhi is earning a lot of revenue these days. It
requires fixed capital investment for which it has to borrow money.
What do you think is going to be the size of the investment required?
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Answer:
 The size of investment required will be low as the ‘Future Business’ is in trading
business. The fixed capital requirement generally is low in trading business.
Question :30
Atul is thinking of opening a scissors manufacturing plant. He requires capital
investment. He discusses the project with his father. His father after listening to his
project tries to find out the fixed capital requirement for his plant.
What do you think will be the fixed capital requirement for the scissors
manufacturing plant of Atul?
Answer:
 The fixed capital requirement for the plant of AtuI will be high as it is a
manufacturing plant. For a manufacturing plant the fixed capital requirement is
high since the purchase of plant and machinery, equipments, etc. is involved.
Question :31
Vrinda is an MBA pass out from a very good MBA college. Her father has restaurant
business. Their company has 15 restaurants in Europe. As soon as Vrinda joins the
business she decides to take this number to 25 by opening 10 more restaurants in
the major cities of Europe.
What do you think will be the fixed capital requirement here? Why?
Answer:
 The fixed capital requirement would be high.
 The reason behind the high requirement of fixed capital is ‘scale of operations’.
The restaurant business run by them is already being operated at a large scale
with 15 restaurants in operation.
Question :32
Ravi has started a pizza base manufacturing business. The early morning schedule
is very busy as the product is dispatched as soon as it is made to keep it fresh and
is sent to the various pizza making restaurants or hotels. Daily fresh pizzadbase has
to be delivered on the basis of estimated orders as there is no sure shot
consumption pattern in the city.
What do you think is going to be the working capital requirement of this business?
Why?
Answer:
 The working capital requirement of this business will be low.
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 The reason for this low requirement is that the production cycle for Pizza base
is short and as the production is made on estimated order no inventory is
required which will further prevent inventory costs.
Question :33
Hot Winters’ is a premium sweater making company. The sweaters are worn in
many countries and they are of very high quality. For six months of the year the
company is almost without work but the remaining six months it is busy in
preparing almost 10 million sweaters for its customers in different parts of the
world.
What do you think is going to be the working capital requirement of this company?
Why?
Answer:
 The working capital requirement of this company will be high.
 Though the company is almost without work for six months yet for the
remaining six months it produces almost 10 million sweaters thus require a
huge working capital since the scale of operations is large.
Question :34
Dheeraj has opened a company. He has come from Australia to set up a business of
his father here in India. He decides to meet a person who owns huge chunks of
property. He decides to take a piece of land for his company on lease from him.
What do you think is going to be the fixed capital requirement of his company?
Why?
Answer:
 The fixed capital requirement of Dheeraj’s company will be less.
 The reason for this less requirement will be a financial alternative in the form
of lease that he has generated saving his funds which otherwise would have
been used in purchasing the land.
Question :35
An organisation is busy preparing its financial blueprint for its future operations.
The idea is to create satisfactory amount of money which should be there in the
reach of the organisation at the right time.
Which concept of financial management has been highlighted in the above case?
What are the financial plans made for a year known as?
What are the twin objectives of financial planning?
Answer:
251
 The concept of financial management highlighted is ‘Financial Planning’.
 The financial plans made for a year are known as ‘Budgets’.
 The twin objectives of financial planning are:
o To ensure proper availability of funds whenever the need arises.
o To ensure that there is no unnecessary raising of funds by the organisaiton.
Question :36
Indian Logistics’ has its own warehousing arrangements at key locations across the
country. Its warehousing services help business firms to reduce their overheads,
increase efficiency and cut down distribution time.
State with reason, whether the working capital requirements of ‘Indian Logistics’
will be high or low.
Answer:
 The working capital requirement will be ‘low’ as the firm is involved in a service
industry which does not have to buy and maintain inventory.
Question :37
‘Sarah Ltd.’ is a company manufacturing cotton yarn. It has been consistently
earning good profits for many years. This year too, it has been able to generate
enough profits. There is availability of enough cash in the company and good
prospects for growth in future. It is a well managed organisation and believes in
quality, equal employment opportunities and good remuneration practices. It has
many shareholders who prefer to receive a regular income from their investments.
It has taken loan of 40 lakhs from IDBI and is bound by certain restrictions on the
payment of dividend according to the terms of loan agreement.
The above discussion about the company leads to various factors which decide
how much of the profits should be retained and how much has to be distributed by
the company. Quoting the lines from the above discussion identify and explain any
four such factors.
Answer:
 ‘It has been consistently earning good profits for many years’.
 It relates to the stability of earnings of the company as a company having
stable income is always in a better position to pay higher dividend. Companies
having inconsistent and unstable earnings prefer not to declare a high rate of
dividend.
 ‘There is availability of enough cash in the company’.
 The above line reflects the cash flow position of the business which is another
major factor influencing the dividend decision. In order to declare higher rate
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of dividend, the company should have enough cash. A company remaining
short of cash finds it difficult to pay dividend.
 ‘It has many shareholders who prefer to receive a regular income from their
investments’.
 Shareholder’s preference is highlighted in the above statement. The
management of the company should keep in mind the preferences of
shareholders while they declare dividend. Some shareholders prefer to receive
a regular income in the from of dividend.
 ‘It has taken a loan of 40 lakhs from IDBI and is bound by certain restrictions
on the payment of dividend’.
Question :38
A company ‘White White Sheets’ is a successful bed sheet selling company. It sells
Rs.1 crore worth sheets to a corporate customer. The company gives a period of 2
months to the client to pay for the sheets. The company send an invoice to the
customer and the inventory account gets reduced by Rs.1 crore. The account
receivable is increased by Rs.1 crore. When its corporate client pays within the
period of 2 months the cash is increased by Rs.1 crore and the account receivable
is reduced by Rs.1 crore.
In the above financial transaction the essential ingredients of which concept of
‘financial management’ have been highlighted?
What is the other term used for long term investment decision?
Which concept of financial management is related to selection of the best
financing or investment alternative?
Answer:
 In the above case the essential ingredients of ‘sound working capital
management’ have been highlighted. They are Accounts receivables, Cash and
Inventory.
 The other term used for long term investment is ‘Capital Budgeting Decision’.
 The concept of financial management related is ‘financial decisions’.
Question :39
‘Abhishek Ltd.’ is manufacturing cotton clothes. It has been consistently earning
good profits for many years. This year too, it has been able to generate ^ profits.
There is availability of enough cash in the company and good prospects for growth
in future. It is a well managed organisation and believes in quality, equal
employment opportunities and good remuneration practices. It has many
shareholders who prefer to receive a regular income form their investments.
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It has taken a loan of Rs.50 lakhs from I.C.I.C.I Bank and is bound by certain
restrictions on the payment of dividend according to the terms of the loan
agreement.
the company. Quoting the lines from the above discussion, identify and explain any
four such factors.
Answer:
 Factors affecting divided decision:
o ‘Consistently earning good profits’. It relates to the stability of earnings of the
company as a company having stable income is always in a better position to
pay higher dividend. Companies having inconsistent and unstable earnings do
not prefer declaring high rate of dividend.
o ‘There is availability of enough cash in the company’. The above line reflects
the cash flow position of the business which is another major factor influencing
the dividend decision. In order to declare higher rate of dividend the company
should have enough cash. A company remaining short of cash finds it difficult
to pay dividend.
o ‘It has many shareholders who prefer to receive a regular
income’. Shareholders’ preference is highlighted in the above statement. The
o ‘It has taken a loan of Rs.50 lakhs from I.C.I.C.I Bank and is bound by certain
restrictions on the payment of dividend’. The above statement highlights
contractual constraints due to which the company is bound by certain
restrictions on the payment of dividend. If a company has taken loan, the
lender may impose few restrictions on the declaration of dividend in future.
The dividend policy of the firm should not violate the terms and conditions of
the loan agreement.
Question :40
Raghav is trying to co-ordinate the functioning of various departments like sales
and production. He has been trying to do this with the help of a concept of
financial management. He quite often calls people of both departments and tells
them to work within means. He has even prescribed a budget for it. During the
time, when he is doing a lot of analysis he connects the decision of present with
the outcomes of future. This can especially he seen in two of the prominent
decisions. One is the investment and the other is the financing decision- so the
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interlinking of these two decisions is assumed by him. When the year ends it is
easy for him to take some strong decisions. This happens because he is able to
evaluate the performance of various departments in terms of revenue generated
and the expenses incurred. No business is risk proof. However, he knows that at
least business shocks which a business can suffer can be minimised thus laying
foundation for a better future. His involvement in the work is definitely
appreciable.
Which concept of financial management has been highlighted in the above case?
Identify the types of this concept highlighted in the above case.
Answer:
 The concept of financial management which is highlighted in the above case is
‘Importance of financial planning’.
 The importance of financial planning highlighted in the above case are:
o It helps in coordinating various business functions like purchase, production
and sales. Raghav is trying to coordinate the functioning of various
departments like sales and production.
o It helps in linking, the present with the future. During the time when he is
doing a lot of analysis he connects the decision of present with the outcomes
of future.
o It helps in linking the investment decision with the financing decision. One is
the investment and the other is the financing decision- so the interlinking of
these two decisions is assumed by him.
o It helps in the evaluation of actual performance easier. This happens because
he is able to evaluate the performance of various departments in terms of
revenue generated and the expenses incurred.
o It helps in avoiding business shocks and thus prepares the company for future.
o However, he knows that at least business shocks which a business can suffer
can be minimised thus laying foundation for a better future.
Question :41
‘Yiyo Ltd.’ is a company manufacturing textiles. It has a share capital of Rs.60 lakhs.
The earning per share in the previous year was Rs.0.50. For diversification, the
company requires additional capital of ?40 lakhs. The company raised funds by
issuing 10% debentures for the same. During the current year the company earned
a profit of Rs.8 lakhs on capital employed. It paid tax @ 40%.
(a) State whether the shareholders gained or lost, in respect of earning per share
on diversification. Show your calculations clearly.
255
(b) Also, state any three factors that favour the issue of debentures by the
company as part of its capital structure.
Answer:
 The working capital requirement will be ‘low’ as the firm is involved in a service
industry which does not have to buy and maintain inventory.
 (b) Following are the factors that favour the issue of debentures:
 Managerial control. The company has already issued a share capital of ?60
lakhs. Further use of equity can completely dilute the control into the hands of
the shareholders. Hence to have a certain degree of say in management the
company issued debentures.
 Tax deductibility. Interest paid by the company to its debenture holders is tax
deductible. The company is paying 40% tax. Therefore it is better for the
company to issue debentures. High tax rate makes debt relatively cheaper.
 Cost consideration. Raising capital through debentures is cheaper as compared
to equity shares. Raising funds through debt involves low floatation costs.
Moreover interest paid on debentures is a deductible expense. The interest is
deducted from firm’s earnings and then the net amount is used for calculating
tax liabilities. Hence more debt in the capital structure means low cost of
overall capital.
Question :42
Sarah Ltd.’ is a company manufacturing cotton yarn. It has been consistently
earning good profits for many years. This year too, it has been able to generate
enough profits. There is availability of enough cash in the company and good
256
prospects for growth in future. It is a well managed organisation and believes in
quality, equal employment opportunities and good remuneration practices. It has
many shareholders who prefer to receive a regular income from their investments.
It has taken loan of 40 lakhs from IDBI and is bound by certain restrictions on the
payment of dividend according to the terms of loan agreement.
the company. Quoting the lines from the above discussion identify and explain any
four such factors.
Answer:
 ‘It has been consistently earning good profits for many years’.
 It relates to the stability of earnings of the company as a company having
stable income is always in a better position to pay higher dividend. Companies
having inconsistent and unstable earnings prefer not to declare a high rate of
dividend.
 ‘There is availability of enough cash in the company’.
 The above line reflects the cash flow position of the business which is another
major factor influencing the dividend decision. In order to declare higher rate
of dividend, the company should have enough cash. A company remaining
short of cash finds it difficult to pay dividend.
 ‘It has many shareholders who prefer to receive a regular income from their
investments’.
 Shareholder’s preference is highlighted in the above statement. The
 ‘It has taken a loan of 40 lakhs from IDBI and is bound by certain restrictions on
the payment of dividend’.
 The above statement highlights contractual constraints due to which the
company is bound by certain restrictions on the payment of dividend. If a
company has taken loan, the lender may impose few restrictions on the
declaration of dividend in future. The dividend policy of the firm should not
violate the terms and conditions of the loan agreement.
Question :43
Somnath Ltd. is engaged in the business of export of garments. In the past, the
performance of the company had been upto the expectations. In line with the
latest technology, the company decided to upgrade its machinery. For this, the
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Finance Manager, Dalmia estimated the amount of funds required and the timings.
This will help the company in linking the investment and the financing decisions on
a continuous basis. Dalmia therefore, began with the preparation of a sales
forecast for the next four years. He also collected the relevant data about the
profit estimates in the coming years. By doing this, he wanted to be sure about the
availability of funds from the internal sources of the business. For the remaining
funds he is trying to find out alternative sources from outside.
Identify the financial concept discussed in the above para. Also state the objectives
to be achieved by the use of financial concept, so identified.
Answer:
 Financial planning concept has been discussed in the above para.
 Following are the two objectives of Financial planning:
o To ensure availability of funds when required. Financial planning ensures that
sufficient funds are available with the enterprise as and when required. For this
purpose proper estimation of funds are carried out for different purposes like
for the purchase of long-term assets or for meeting day-to-day expenses of
business.
o To see that the firm does not raise resources unnecessarily. Financial planning
makes sure that an enterprise is adequately funded. It also ensures that firms
do not raise funds unnecessarily. It aims at the best possible use of financial
resources.
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Chapter 10 Financial Market
Question :1
Meca Ltd. a reputed automobile manufacturer needs Rupees ten crores as
additional capital to expand its business. Atul Jalan, the CEO of the company
wanted to raise funds through equity. On the other hand the Finance Manager,
Nimi Sahdev said that the public issue may be expensive on account of various
mandatory and non-mandatory expenses. Therefore, it was decided to allot the
securities to institutional investors.
Name the method through which the company decided to raise additional capital.
Answer:
 Private placement is method through which the company decided to raise
additional capital.
Question :2
These days, the development of a country is also judged by its system of
transferring finance from the sector where it is in surplus to the sector where it is
needed most. To give strength to the economy, SEBI is undertaking measures to
develop the capital market. In addition to this there is another market in which
unsecured and short-term debt instruments are actively traded everyday. These
markets together help the savers and investors in directing the available funds into
their most productive investment opportunity.
Name the function being performed by the market in the above case.
Also, explain briefly three other functions performed by this market.
Answer:
 Mobilisation of funds is the function being performed by the financial market
in the above case. It performs the allocative function by mobilisation of savings
and channelising them into the most productive avenues.
 The other three functions being performed by the financial market are outlined
below:
o It helps to determine the price for the financial asset in a particular financial
market through the market forces of demand and supply.
o It provides liquidity to the financial assets by providing ready markets wherein
the securities can be easily converted into cash or vice versa.
o It provides a common platform for exchange of securities thereby reducing the
cost of transactions by saving time, effort and money spent by the buyers and
sellers in locating each other.
Question :3
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needed the most. To give strength to the economy, SEBI is undertaking measures
to develop the capital market. In addition to this, there is another market in which
unsecured and short-term debt instruments are actively traded every day. These
Name the market segment other than the capital market segment in which
unsecured and short-term debt instrument are traded.
Answer:
 Mobilisation of funds is the function being performed by the financial market
in the above case. It performs the allocative function by mobilisation of savings
and channelising them into the most productive avenues.
 Money market is the other segment of market.
Question :4
ABC Ltd. issued prospectus for the subscription of its shares for Rs. 500 crores in
2008. The issue was oversubscribed by 20 times. The company issued shares to all
the applicants on pro-rata basis. Later SEBI inspected the prospectus and found
some misleading statement about the management of the company in it. SEBI
imposed a penalty of Rs. 5 crores and banned its three executive directors for
dealing in securities market for three years. Identify the function and its type
performed by SEBI in the above case.
Answer:
 Protective function has been performed by SEBI in the above case. And the
type of Protective function is Prohibition of fraudulent and unfair trade
practices.
Question :5
“Money market is essentially a market for short-term funds’. In the light of this
statement state any three features of money market.
Answer:
 The three features of money market are described below:
o It is a market for short term funds whose maturity period is upto one year.
o The main participants are institutional investors.
o Since the cost of securities may be high, investment in the money market
requires huge capital outlay.
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Question :6
“Unicon Securities Pvt. Ltd” was established to deal in securities. It was registered
as a stock broker with National Stock Exchange (NSE) and Bombay Stock Exchange
(BSE) to trade in securities listed at these exchanges. It is also a depository
participant with CDSL and NSDL. In the first three years, it developed its business
successfully. After that the composition of Board of Directors changed. Some
customers complained to the customer care centre of the company that shares
purchased by them and for which the payment has been duly made, were not
transferred to their D’mat Accounts by “Unicon securities Pvt. Ltd” . The executive
of customer care centre promised the aggrieved customers that their shares will
be transferred to their respective D’mat Accounts very soon. But the company
delayed the matter and didn’t transfer the shares of the customers to their D’mat
Accounts. This eroded investors confidence and multiplied, their grievances.
Identify the step of trading procedure in a stock exchange which has not been
followed by “Unicon Securities Pvt. Ltd” .
Name the Apex statutory body of capital market to whom customer can complain
to redress their grievances.
Write two values not followed by Unicon Security Pvt. Ltd.
Answer:
 The step of trading procedure in a stock exchange which has not been followed
by “Unicon Securities Pvt. Ltd” is settlement i.e. the delivery of shares through
the D’mat Account of the broker to D’mat account of the investors.
 The Securities and Exchange Board of India (SEBI) is the Apex statutory body of
capital market to whom customer can complain to redress their grievances.
 The two values not followed by Unicon Security Pvt. Ltd are’:
o Truthfulness
o Fair practices
Question :7
Reshu’s father has gifted her the shares of a large cement company with which he
had been working. The securities were in physical form. She already has a bank
account and does not possess any other forms of securities.
She wished to sell the shares and approached a registered broker for the purpose.
Mention one mandatory detail which she will have to provide with the broker.
Answer:
 Reshu will have to give her Permanent Account Number (PAN) to the broker as
it is mandatory as per law.
Question :8
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Squib Ltd. is a large creditworthy company operating in the Kashmir Valley. It is an
export- oriented unit, dealing in exclusive embroidered shawls. The floods in the
Valley have created many problems for the company. Many craftsmen and
workers have been dislocated and raw material has been destroyed. The firm is
therefore, unable to get an uninterrupted supply of raw materials and the duration
of the production cycle has also increased. To add to the problems of the
organisation, the suppliers of raw materials who were earlier selling on credit are
asking the company for advance payment or cash payment on delivery. The
company is facing a liquidity crisis. The CEO of the company feels that taking a
bank loan is the only option with the company to meet its short-term shortage of
cash.
As a finance manager of the company, name and explain the alternative to bank
borrowings that the company can use to resolve the crisis.
Answer:
 Commercial Papers may be used by Squib Ltd. as it is a popular short term
instrument which is issued by large and credit worthy companies. The
instrument is an unsecured promissory note and is freely transferable by
endorsement. Its maturity period may range from a fortnight to a year. It is
sold at discount and redeemed at par.
Question :9
Mr. Sanjay Nehra was the Chairman of Taran Bank. The bank was earning good
profits. Shareholders were happy as the bank was paying regular dividends. The
market price of their shares was also steadily rising. The bank was about to
announce taking over the ‘Vena Bank.’ Mr. Sanjay Nehra knew that the share price
of Taran Bank would rise on this announcement. Being a part of the bank, he was
not allowed to buy shares of the bank. He called one of his rich friends Sudhir and
asked him to invest Rs.5 crores in shares of his bank promising him the capital
gains.
As expected, the share prices went up by 40% and the market price of Sudhir’s
shares was now ? 7 crores. He earned a profit of Rs. 2 crores. He gave Rs. 1 crore to
Mr. Sanjay Nehra and kept Rs. 1 crore with himself. On regular inspection and by
conducting enquiries of the brokers involved, the Securities and Exchange Board of
India (SEBI) was able to detect this irregularity. The SEBI imposed a heavy penalty
on Mr. Sanjay Nehra.
By quoting the lines from the above paragraph, identify and state any two
functions that were performed by SEBI in the above case
Answer:
 The two functions performed by SEBI in the given case are stated below:
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o Regulatory function is being performed by SEBI: “On regular inspection and by
conducting inquires of the brokers involved.”
o Protective function is performed by SEBI: “The SEBI imposed a heavy penalty
on Mr. Sanjay Nehra.”
Question :10
Mr. Vikas Mehra was the Chairman of IBM Bank. The bank was earning good
profits. Shareholders were happy as the bank was paying regular dividends. The
market price of their shares was also steadily rising. The bank was about to
announce the taking over of ‘UK Bank’. Mr. Vikas Mehra knew that the share price
of IBM Bank, would rise on this announcement. Being a part of the bank, he was
not allowed to buy shares of the bank. He called one of his rich friends Mukand
and asked him to invest Rs. 4 crores in the shares of his bank promising him the
capital gains.
As expected, after the announcement, the share prices went up by 50% and the
market price of Mukand’s shares was now Rs. 6 crores. Mukand earned a profit of
Rs. 2 crores. He gave Rs. 1 crore to Vikas Mehra and kept Rs. 1 crore with him. On
regular inspection and by conducting enquiries of the brokers involved, the
Securities and Exchange Board of India (SEBI) was able to detect this irregularity.
SEBI imposed a heavy penalty on Vikas Mehra.
Quoting lines from the above paragraph, identify and state any two functions
performed by the SEBI in the above case.
Answer:
 The two functions performed by SEBI in the given case are stated below:
o Regulatory function is being performed by SEBI: “on regular inspection and
conducting inquires of the brokers involved.”
o Protective function is performed by SEBI: “The SEBI imposed heavy penalty on
Mr.Vikas Mehra.”
Question :11
Supriya’s grandmother who, was unwell, called her and gave her a gift packet.
Supriya opened the packet and saw many crumpled share certificates inside. Her
grandmother told her that they had been left behind by her late grandfather.
As no trading is now done in physical form, Supriya wants to know the process by
adopting which she is in a position to deal with these certificates.
Identify and state the process.
Also, give two reasons to Supriya why dealing with shares in physical form has
been stopped.
Answer:
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 Dematerialisation refers to the process of holding securities in electronic form.
 The two problems of holding shares in physical form are as follows:
o When the shares certificates are held in physical form, there is danger of loss
or theft.
o There is risk of forgery, as the buyer may be delivered fake certificates.
Question :12
Mission Coach Ltd. is a large creditworthy company that manufactures coaches for
the Indian Railways. It now wants to export these coaches to other countries and
decides to invest in new hi-tech machines. Since the investment is large, it requires
long-term finance. It decides to raise funds by issuing equity shares. The issue of
equity shares involves huge floatation cost. To meet the expenses of floatation
cost, the company decides to tap the money market.
Name and explain the money-market instrument the company can use for the
above purpose.
What is the duration for which the company can get funds through this
instrument?
State any other purpose for which this instrument can be used.
Answer:
 Commercial Papers can be used for Bridge financing by Mission Coach Ltd. as it
is issued by large and credit worthy companies. The instrument is in the form
of an unsecured promissory note and is freely transferable by endorsement. It
is sold at discount and redeemed at par.
 Its maturity period may range from a fortnight to a year.
 It is also used to meet the short term seasonal and working capital
requirements of a business enterprise.
Question :13
Ganesh Steel Ltd. is a large and creditworthy company that manufactures steel for
the Indian market. It now wants to cater to the Asian market and decides to invest
in new hi-tech machines. Since the investment is large, it requires long-term
finance. It decides to raise funds by issuing equity shares. The issue of equity
shares involves huge floatation cost. To meet the expenses of floatation cost, the
company decides to tap the money market.
above purpose.
instrument?
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Answer:
 Commercial Papers can be used for Bridge financing by Ganesh Steel Ltd. as
they are issued by large and credit worthy companies. The instrument is in the
form of an unsecured promissory note and is freely transferable by
endorsement. It is sold at discount and redeemed at par.
 Its maturity period may range from a fortnight to a year .
 It is also used to meet the short term seasonal and working capital
requirements of a business enterprise.
Question :14
Incorporated in 1990, Raju Dairy Ltd., is one of the leading manufacturers and
marketers of dairy-based branded foods in India. In the initial years, its operations
were restricted only to collection and distribution of milk. But, over the years it has
gained a reasonable market share by offering a diverse range of dairy based
products including fresh milk, flavoured yogurt, ice creams, butter milk, cheese,
ghee, milk powders etc. In order to raise capital to finance its expansion plans, Raju
Dairy Ltd. has decided to approach capital market through a mix of Offer for sale of
Rs. 4 crore shares and a public issue of Rs. 2 crore shares.
Name and explain the segment of capital market being approached by the
company.
Identify the two methods of floatation used by the company to raise the required
capital. Give one difference between them.
Answer:
 Primary market is the segment of capital market being approached by the
company. It is also known as the new issue market as the securities are issued
for the first time by the companies through this market.
 The two methods of floatation used by the company to raise the required
capital are – Issue through prospectus and Offer for sale.
 In case of issue through prospectus, the company approaches the members of
the general public directly by issuing a prospectus whereas in case of Offer for
sale, the company approaches members of the general public indirectly
through intermediaries like issuing houses, stock brokers etc.
Question :15
The SEBI has imposed a penalty of Rs. 7,269.5 crore on Pearls Agrotech
Corporation Limited (PACL) and its four directors — Tarlochan Singh, Sukhdev
Singh, Gurmeet Singh and Subrata Bhattacharya who had mobilised funds from the
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general public through illegal collective investment schemes in the name of
purchase and development of agriculture land. While imposing the penalty, the
biggest in its history, Securities and Exchange Board of India (SEBI) said the
company deserved “maximum penalty” for duping the common man. Its
Prevention of Fraudulent and Unfair Trade Practices Regulations provides for
“severe to severe penalties” for dealing with such violations. As per SEBI norms, it
can impose a penalty of Rs. 25 crore or three times of the profit made by indulging
in fraudulent and unfair trade practices and in the present case, the regulator has
imposed a fine equivalent to three times of the illicit gains.
State the objectives of setting up SEBI.
Identify the type of function performed by SEBI by quoting lines from the
paragraph.
Answer:
 The objective of setting up SEBI are outlined below:
o To prevent trading malpractice in the securities markets.
o To protect the rights and interest of investors, and to guide and educate them.
o To regulate and develop a code of conduct and fair practices by intermediaries
like brokers, merchant bankers, etc. with a view to making them competitive
and professional.
o To regulate stock exchanges and the securities market to promote their orderly
functioning.
o Protective function is performed by SEBI: “The SEBI has imposed a penalty of
Rs. 7,269.5 crore on Pearls Agrotech Corporation Limited.”
Question :16
Harsh works as a manager in a software company. He opened a Demat account
with a broking house in order to trade in securities with the money he received as
his first performance bonus. Since then he has been very active in stock trading
under the guidance of a stock broker. However, when he was hospitalised for a
few days this year, his wife received several calls from the his stock broker for
permission to transact on Harsh’s behalf. Though she told him to wait till her
husband had recovered, the stock broker went ahead and executed the
transactions. When Harsh got home from hospital, he discovered that the
unauthorised transactions had led to a loss for him.
Harsh complained to the broking house, but they claimed he had authorised the
transactions. Keeping in view, the guidelines issued by the National Stock Exchange
that he had read in the national newspaper Harsh demanded proof and threatened
to file a complain. Since, the broking house had no evidence that the deals had
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been authorised they made good the loss that Harsh had incurred due to the
transactions.
What is a Demat account?
Who is acting as the depository participant for Harsh?
Name the document that is legally enforceable and helps to settle the claims
between the investor and the broker.
Answer:
 A Demat account is an account used for holding securities in electronic form.
 The Broking house is acting as the depository participant for Harsh.
 A contract note is a legally enforceable document that helps to settle the
claims between the investor and the broker.
Question :17
Make Good Technologies Ltd. is one of the top suppliers of security software
products and solutions in India with a market share of over 20% in the retail
segment. Its customers includes people all sections of the society i.e. both
households and corporates. Its unique threat detection system works to detect
security threats including virus attacks in real time to protect users’ IT assets across
varied platforms and devices. The company has an established track record of
growth and financial performance. At present the company operates only through
its website. The company now intends to launch a range of computer accessories
and plans to market it by opening its own retail outlets. So, the board of directors
of the company have decided to only raise capital for the first time through an
issue of shares, but at the same time they do not wish to get into the hassles of
launching a public issue of shares.
Name and explain the way through which the company can raise finance by
allotting securities to selective individuals and institutions only.
Can the company also raise capital through a right issue? Why or why not? Give a
reason to justify your answer.
Answer:
 The company can raise finance by allotting securities to selective individuals
and institutions only through Private Placement. It is a relatively economical
way of raising money as it helps to save time, cost and money involved in the
process of issuing securities.
 No, the company cannot raise capital through a right issue as it is issuing
securities for the first time. A rights issue is a pre-emptive right given only to
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the existing shareholders to subscribe to the securities of the company as per
its terms and conditions.
Question :18
After doing a course in online trading, Arsh started an online portal for stock
trading under the name ‘Investment Guru’. He met his school friend Ajay after a
long time in a bank where Ajay had come to open a D-Mat account. Arsh urged
Ajay to invest in the forthcoming IPO of a blue chip companies whereas Ajay was
inclined to buy existing securities of the other companies to build his investment
portfolio.
Identify the two different types of capital market being referred to by quoting lines
from the para.
State any four differences between the two different types of capital markets as
identified in part (1).
Answer:
 The two different types of capital market being referred to are-
 Primary Market: “Arsh urged Ajay to invest in the forthcoming IPO of a blue
chip companies.”
 Secondary Market: “Ajay was inclined to buy existing securities of the other
companies to build his investment portfolio.”
Question :19
Ketan won a cash prize of Rs. 20,000 in the National level Robotics Competition.
On the advise of his father, he visits a nearby bank to open a Fixed deposit account
in his name with the prize money. His sister Suhasini accompanied him to the bank.
On reaching the bank, he notices big banners which are placed within the premises
containing information about the various arrangements through which corporates
may raise their capital through the bank. Being a finance graduate, Suhasini
explains to Ketan that banks play the role of the financial intermediary by helping
in the process of channelizing the savings of the households into the most
profitable business ventures.
In context of the above case: .
Name another financial intermediary that helps in the process of channelizing the
savings of the households into the most productive use.
Also, outline any two functions of another financial intermediary as identified in
part.
Answer:
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 Financial markets is the other financial intermediary that helps in the process
of channelizing the savings of the households into the most productive use.
 The two functions of financial market are as follows:
o It helps to determine the price for the financial asset in a particular financial
market through the market forces of demand and supply.
o It provides liquidity to the financial assets by providing ready markets wherein
the securities can be converted into cash or vice versa easily.
Question :20
Ragu works as a waiter in a five star hotel in Mumbai. While serving the customer
he overhears him at the table saying that the he has made profits higher than
expected by investing in securities market. So, Ragu also decides to make a
nominal investment from his savings in the stock market in pursuit of higher gains.
As a financial consultant, apprise him of the steps involved in the working of a
Demat system.
Answer:
 Ragu will have to initiate the following steps for trading through a Demat
system:
o He will have to first open a Demat account with a depository participant (DP)
who may either be a bank, broker or financial services company by furnishing
certain details and information about himself including PAN number, date of
birth, bank account details, income details etc.
o If he plans to buy shares through a public offer he will have to give details of his
Demat account, bank account etc. On allotment the shares will be directly
credited to his account.
o If he decides to buy shares otherwise, he will have to instruct his broker with
the details about the name of the company, number of shares, price etc. The
transaction will be executed through the depository participant and he will
have to make payment for them within T + 2 days.
o On contrary, whenever he decides to sell shares, he will have to instruct his
broker with the details about the name of the company, number of shares,
price etc. The transaction will be executed through the depository participant
and his account will be debited accordingly. He will receive the payment in T +
2 days.
Question :21
The Bombay Stock Exchange (BSE) is Asia’s first stock exchange and the world’s
11th largest stock exchange. It became the first stock exchange to be recognized
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by the Indian Government under the Securities Contracts Regulation Act. Its
automated, screen-based trading platform called BSE On-Line Trading (BOLT) had a
capacity of 8 million orders per day. The BSE has also introduced a centralized
exchange-based internet trading system, BSEWEBx.co.in to enable investors
anywhere in the world to trade on the BSE platform.
Name the organisation that regulates the working of stock exchanges in India.
State any three functions performed by stock exchanges.
Give any two advantages of screen-based trading.
Answer:
 Securities And Exchange Board of India (SEBI) regulates the working of stock
exchanges in India.
 Three functions performed by stock exchanges are as follows:
o Ensures liquidity and marketability of existing securities by a providing a ready
and continuous market for the sale and purchase of securities.
o Helps in determining the prices of the securities through the forces of demand
and supply.
o It provides a legal framework for fair and safe dealings.
o Two advantages of screen-based trading are as follows:
o As the investors get access to the stock market during real time, there is
complete transparency in the dealings.
o It provides a common platform for exchange of securities thereby increasing
the efficient transactions by saving time, effort and money.
Question :22
Ragunath Ahuja is one of the Promoter-Director of Vishwas Ltd. The company is
engaged in the real estate sector, which has recently witnessed a steady fall in its
revenue and the value of its assets due to a downward trend persisting in the
market in specific and the economy in general. The periodical financial results of
the company were to be declared in a fortnight time. Ragunath Ahuja, being an
insider, had access to unpublished price sensitive information related to it.
Consequently, he sells a major portion of his holdings in an anticipation of a fall in
the market price of the shares of the Company subsequent to the announcement
of periodical financial results of the company. Moreover, he doesn’t inform The
Securities and Exchange Commission (SEC) about the dealings.
On conducting a probe, Securities and Exchange Board Of India (SEBI) finds
Ragunath Ahuja guilty of insider trading. As per law, company directors, officials or
any individual with a stake of 10% or more in the company are considered to be
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insiders and they are required to report their insider transactions within two
business days of the date the transaction occurred.
State the purpose of setting up SEBI.
Identify the type of function performed by SEBI by quoting lines from the
paragraph.
Answer:
 SEBI has to be responsive to the needs of three groups, which constitute the
market namely:
 The issuers of securities so as to provide them a platform for raising capital in
an easy, effective and efficient manner.
 The investors so as to protect their interests in securities by keeping them
abreast about the developments through true and appropriate information.
 The market intermediaries in order to provide them a framework so as to
enable them perform their functions effectively and efficiently.
 Regulatory function is being performed by SEBI: “On conducting a probe
Securities and Exchange Board of India (SEBI) finds Ragunath Ahuja guilty of
insider trading.”
Question :23
Sumita is a professor in a reputed business institute. While explaining the
procedure of stock exchange trading, she shared with her students that many
years back she had bought 200 shares of a leading automobiles company. As per
the settlement procedure she paid for the shares and received the share
certificates in physical form. However, when she had sent those certificates to the
company to get them endorsed in her name, she was informed by the company
that those certificates were duplicate.
Therefore, in order to protect the investors from many such malpractices, now
only screen-based trading is done and dematerialisation is compulsory.
What is screen based trading?
Give the meaning of ‘dematerialisation’. State any two of its advantages.
Answer:
 Screen-based trading refers to the process of buying or selling securities online.
 Dematerialisation refers to the process of holding securities in electronic form.
The two advantages of Dematerialisation as follows:
o The securities in the demat account can be offered as security to raise loans.
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o Since the shares certificates are not held in physical form, there is no danger of
loss, theft or forgery.
Question :24
Madhav’s is one of the India’s most trusted brands in Indian sweets and snacks
segment. The company has manufacturing plants in Kota, Kanpur, New Delhi, and
Mumbai. Madhav’s has its own retail chain stores and a range of restaurants in
these cities. Now, the company plans to extend its business in 12 more cities in
India. In order to raise the funds, its directors have decided to float a public issue
through prospectus. Besides, it intends to raise money to meet the floatation costs
in terms of brokerage, underwriting commission, advertising etc.
1. What is the other name used for the funds required to meet floatation
costs?
2. Describe briefly the short term instrument popularly used by the
companies to raise for the funds required to meet floatation costs.
Who can issue them?
3. Distinguish between the two types of financial markets that the
company intends to approach to meet its financial needs.
Answer:
 Bridge financing is the other name used for the funds required to meet
floatation costs.
 Commercial Papers issued by large and credit worthy companies. The
instrument is in the form of an unsecured promissory note and is freely
transferable by endorsement. It is sold at discount and redeemed at par. Its
maturity period may range from a fortnight to a year. It is also used to meet
the short term seasonal and working capital requirements of a business
enterprise. For example it is used for the purpose of bridge financing.
 Capital Market and Money Market.
 Differences between Primary Market and Secondary Market:
 Differences between Capital Market and Money Market:
Question :25
During navratras ,Varun finalises a deal to buy a new house. So, he visits a nearby
branch of ‘Subh Bank’ to withdraw Rs. 10 lakhs from his account in order to pay
the token money to the seller. In the bank he observes that a large number of
customers are present to make cash with drawls, probably because it is an
auspicious time to make purchases. After sometime, he overhearsone of the bank
staff members telling his colleague that, “Today ‘Subh Bank’ is likely to fall short of
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cash and to make up for the deficit and maintain its cash reserve ratio it will have
to approach another bank.”
Identify the instrument that ‘Subh Bank’ will use to meet its short-term
requirements of funds.
State any three feature of the instrument as identified in part (1).
Answer:
 Call money is the instrument used by ‘Subh Bank’ to meet its short term
requirements of funds.
 Three features of call money are as follows:
o Call money is an instrument through which one bank may borrow money from
another bank to maintain the cash reserve ratio as per the guidelines of RBI.
o Its maturity period may be from a single day to a fortnight.
o The rate at which the interest is paid on call money is called call rate.
Question :26
The stock market regulator, Securities and Exchange Board of India (SEBI) has
initiated a certification programme for all market intermediaries. Under this
programme, people associated with stock markets in any way, will have to obtain a
qualifying certificate from the regulator.The National Institute of Securities Market
(NISM), a trust formed by SEBI, is tasked with the certification programme.
Identify the type of function performed by SEBI.
Outline any two reasons for setting up SEBI.
Answer:
 Developmental function is being carried out by SEBI by starting a certification
programme for all market intermediaries.
 SEBI was set up as a regulatory body by the government for the following
reasons:
o To curb malpractices in the financial market.
o To enhance the confidence of the investors by ensuring fair, efficient and
transparent dealings.
Question :27
A very famous article was published in a finance magazine. A portion of that article
is present here:
Financial market is not a usual market where you buy commodities but a special
place where one can have all the necessary information about the different
securities traded in the market. The buyers on the one hand get to know about the
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securities and they get a place where securities are sold helping reduce the
wastage of time, effort and money. The financial experts say otherwise the job of
the people involved in the securities transactions would have been really difficult.
Securities get a buyer on the one hand and the seller on the other hand on a
common platform—this helps in easy conversion of securities into cash. In the
economies where there is no stock exchange the funds remain blocked. The money
trapped in the houses should come out and flow in the economy and when they
are invested in the shares of a company they have the capability to attain the
maximum value. People would always like to sell securities on their own
conditions. No government intervention can predict the price of securities. The
stock market is a place which runs on the forces of demand and supply thus giving
a security its price depending upon its demand. One wonders how the economy of
a company can grow without the existence of financial market.
Identify explain the functions of financial market discussed in the above case.
Answer:
 The various functions of financial market highlighted in the above case are:
o Financial market reduces the cost of transactions. The buyers on the one hand
get to know about the securities and they get a place where securities are sold
helping reduce the wastage of time, effort and money.
o Financial market provides liquidity to financial assets. Securities get a buyer on
the one hand and the seller on the other hand on a common platform-this
helps in easy conversion of securities into cash.
o Financial market helps in mobilization of savings and channelises them to the
most productive use. The money trapped in the houses should come out and
flow in the economy and when they are invested in the shares of a company
they have the capability to attain the maximum value.
o Financial market helps in facilitating price discovery of financial assets. The
stock market is a place which runs on the forces of demand and supply thus
giving a security its price depending upon its demand.
Question :28
A bank named ‘Dhan Sangraha Karta’ allows Kapoor family to deposit their money
time and again in it. It gives a definite return to this family which is in the form of
interest. To get this interest the money stored in the household of Kapoor family
gets entry into this bank. Nearby there is a stock exchange, Mr. Raj an Kapoor, who
is the head of the family, goes there and buys securities. He says that in this way
more return in earned by him on his saved money though the risk is also there.
Identify the process in above case performed by the bank and the stock exchange.
What are the roles of the bank and the stock exchange with respect to each other?
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Name a condition for the bank to perform its role in this process.
Name a condition for the stock market to perform its role in this process.
Answer:
 The process performed by the bank and the stock exchange is ‘Financial
Intermediation.
 The bank and the stock exchange are competing intermediaries in the financial
system. The household is making a choice between the bank and the stock
exchange and this choice is given by the financial system to them.
 The bank should provide a higher rate of return to the household saving then
what it would get by lying passive in the household itself. Since the money will
only decrease in value there will be no return.
 The stock exchange will help the household invest money in a company’s
security. The chances of growth of money could be highest here as the money
is generally invested in companies which show the chances of the best possible
growth.
Question :29
needed the most. To give strength to the economy, SEBI is undertaking measures
to develop the capital market. In addition to this, there is another market in which
unsecured and short¬term debt instruments are actively traded every day. These
Name the market segment other than the capital market segment in which
unsecured and short-term debt instruments are traded. Also, give any three points
of difference between the two.
Answer:
 Allocative function.
 Money market.
 Difference between Capital and Money market .
Question :30
Ramesh buys a financial asset from the RBI. This financial asset is an instrument of
short term borrowing. He has bought it because he doesn’t want to take
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risk and wants an assured return. This instrument is a promissory note. It is highly
liquid. This instrument is also known as Zero Coupon Bond. On this instrument is
written T-91.
Which financial asset is indicated in the above case?
On whose behalf does the RBI issue this instrument?
Why is this instrument called as the Zero Coupon Bond?
What does T-91 denote here?
What is the minimum amount for which this instrument is available?
Answer:
 The financial asset which is indicated in the above case is ‘Treasury Bill’.
 The RBI issues this instrument on the behalf of the Government of India.
 The instrument is called as Zero Coupon Bond because the interest rate given
by the bank is not given openly. The interest in fact comes in the form of
discount which is given on the face value. The instrument is redeemed at par
(on the written face value). So the instrument is issued at discount.
 T-91 here denotes the maturity period of the Treasury bill which is here 91
days.
 The minimum amount for which T- Bills are available is Rs 25,000. For a higher
value it is given in the multiples of Rs 25,000.
Question :31
A company uses a financial instrument for bridge financing. The instrument here is
short term, low risk, unsecured and highly liquid. It needed to buy machinery for
which it issued equity. This turned out to be expensive as this issue involved
floatation costs. The company is a large and creditworthy and this method has
come up as a great help to it.
Which financial instrument is indicated in the above case?
Which type of instrument is this?
Name the types of floatation costs which are generally involved?
How has this method helped the company?
Name two money market instruments which are issued at discount and redeemed
at Par.
Answer:
 The financial instrument indicated in the above case is ‘Commercial Paper’.
 This is a money market instrument.
 The types of floatation costs involved here are:
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 Brokerage.
 Publishing costs.
 Advertising costs.
 Underwriter’s commission.
 This method has helped the company by providing short-term funds for its
seasonal and working capital needs.
 The two money market instruments which are issued at discount and
redeemed at par are:
 Treasury bill
 Commercial paper.
Question :32
‘Ganesh Steel Ltd.’ is a large and creditworthy company manufacturing steel for
the Indian market. It now wants to cater to the Asian market and decides to invest
in new hi-tech machines. Since the investment is large, it requires long-term
finance. It decides to raise funds by issuing equity shares. The issue of equity
shares involves huge floatation cost. To meet the expenses of floatation cost the
company decides to tap the money- market.
above purpose.
instrument?
Answer:
 The company can use Commercial Paper.
 Commercial paper. It is a short-term unsecured promissory note which is
negotiable and transferable by endorsement and delivery having a fixed
maturity period. It is an instrument issued by large and creditworthy
companies to raise short term funds at lower interest rates.
 The maturity period of commercial paper is from 15 days to one year.
 It can be used to raise short term funds for seasonal needs or to finance
working capital requirements of the business.
Question :33
‘Dhan Samudra’ is a bank, which needs immediate cash. This has been the
situation since the RBI chose to increase the CRR (Cash Reserve Ratio). It is looking
for other banks to meet its cash requirements by borrowing from other banks in
the industry. However, it resorts to a very expensive source of fund. This source of
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fund has an inverse relationship with other sources of funds like commercial paper
and certificates of deposit.
Which financial instrument is highlighted In the above case?
How does increased CRR change the cash requirements by banks?
Why this financial instrument considered an expensive source of finance?
What type of inverse relationship exists between this instrument and commercial
paper or certificates of deposit?
Answer:
 The financial instrument highlighted in the above case is ‘Call Money’.
 The increase in CRR (Cash Reserve Ratio) makes a bank keep a definite amount
of cash. For example, if CRR is 5% then bank will have to keep 5% of its money
as the cash reserve which it will not touch. Thus the ability of the bank to give
loans is reduced thus reducing liquidity in the market.
 Call Money is considered an expensive source of finance because it is made
available to the banks at a very short notice. The interest paid by the banks
seeking call money is call rate. The call rate is highly volatile and changes on an
hourly basis.
 The inverse relationship which exists between call money and these
instruments is that with the rise in the call money rates these sources become
cheaper. So the banks have the option of raising funds from these sources in a
comparatively cheaper manner.
Question :34
A developmental financial institute issues a money market instrument. It is issued
by the financial institute during the time of tight liquidity. This helps the firm to
mobilize large amount of funds in a short period of time.
Which money market instrument is highlighted in the above case?
What are the characteristics of a money market instrument?
Which other type of body can issue this money market instrument? When?
Answer:
 The money market instrument which is highlighted in the above case is
‘Certificate of Deposit’.
 A money market instrument is short-term, highly liquid, unsecured and
involves low risk.
 The other type of body which can issue certificate of deposit is ‘Commercial
Bank’. It issues certificate of deposit when the deposit growth is slow and the
demand for credit is high.
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Question :35
A business firm issues a money market instrument to finance its working capital
requirements. In order to finance the credit sales of the firm it issues this
instrument. A textile firm which is taking goods on credit from this firm promises
to buy on the 25th of the next month. The selling business firm makes use of this
instrument when the’ date arrives.
Which money market instrument is highlighted in the above case?
What is the role of commercial bank in the above process?
Explain the above process in detail.
Answer:
 The money market instrument which is highlighted in the above case is
‘Commercial Bill’.
 When the trade bill is accepted by a commercial bank it becomes a commercial
bill.
 When the goods are sold on credit the buyer has to make payment on a
specific date in the future. The seller now has an option either to make
payment on the specified date or make use of bill of exchange. Here the seller
is known as the drawer (he draws the bill) . and the buyer is known as the
drawee (he accepts the bill). As soon as the bill is accepted it becomes a trade
bill. These bills can be given to a bank or these bill could be discounted with the
bank which makes it a commercial bill as soon as it accepts it. Here onwards
the bank takes the responsibility of taking money from the buyer. The seller
gets a little less than the actual value. The bills receivable are handed over to
the bank.
Question :36
Identify the type of financial market in the following cases:
1. The value of securities issued by a company is low. It has not set up a huge
financial outlay. Mr. Manuj has purchased 100 units of shares with the value
of ?8G each. Though he has small savings yet he is able to invest money in
this financial market.
2. A financial market deals only in short term securities. The securities in the
market may even be issued for a single day.
3. A financial market deals in medium and long term securities such as equity
shares and debentures.
4. The participants in this financial market are institutions like banks,
corporations, large sized companies and members of the public.
5. The securities in this financial market yield low rate of return.
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6. The securities return in this market is riskier in relation to both the returns
as well as principal amount. The reason is the performance of the issuing
companies. When these companies perform well there are chances of high
return but when the other way round happens the returns may go down and
result in loss of money to the investors.
7. In this financial market there is a higher degree of liquidity of the financial
instruments available to the investors as there is an institute which takes
guarantee of this action. The name of this institute is DFHI (Discount Finance
House of India).
8. There is minimum risk of default in this financial market. There is shorter
duration of investment and this provides financial stability to the investors.
The issuing houses have a very good history of creditworthiness.
Answer:
 The type of financial market in the above mentioned cases are:
1. Capital Market
2. Money Market
3. Capital Market
4. Capital Market
5. Money Market
6. Capital Market
7. Money Market
8. Money Market
Question :37
Ramesh the CEO of a company thinks of going with the most popular method of
raising funds used by the public companies. He discussed this option with his
immediate subordinates. After discussion he realises that since his company is a
private company he should think of some other option. Then they think of issuing
the securities through intermediaries like issuing houses or stock brokers. When
his nephew comes to know about his decision, he decides to suggest his uncle
another way. He advises him to involve institutional investors which will help him
raise funds more quickly and reduce many mandatory and non-mandatory
expenses. After a lot of discussion the option suggested by his nephew is chosen as
final.
In the above case identify the various methods of floatation highlighted.
Which method do you think will be applicable in the primary market?
In which type of capital market trading of only existing shares is done?
In which type of capital market only buying of securities is possible as securities
can’t be sold here?
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Which type of capital market doesn’t have fixed geographical location?
Answer:
 The various methods of floatation highlighted in the above case are:
 Offer through prospectus. Ramesh the CEO of a company thinks of going with
the most popular method of raising funds used by the public companies.
 Offer for sale. Then they think of issuing the securities through intermediaries
like issuing houses or stock brokers.
 Private placement. He advises him to involve institutional investors which will
help him raise funds more quickly and many mandatory and non-mandatory
expenses could be avoided.
 The method which will be applicable in the primary market will be ‘offer
through prospectus’.
 The type of capital market in which trading of only existing share is done is
‘Secondary Market (Stock Exchange)’.
 Primary Market
 Primary Market
Question :38
Meca Ltd. a reputed automobile manufacturer needs Rupees ten crore as
additional capital to expand its business. Atul Jaian, the CEO of the company
wanted to raise funds through equity. On the other hand the Finance Manager,
Nimi Sachdev said that the public issue may be expensive on account of various
mandatory and non-mandatory expenses. Therefore, it was decided to allot the
securities to institutional investors.
Name the method through which the company decided to raise additional capital
Answer:
 Private Placement.
Question :39
Sika Ltd., a reputed industrial machines manufacturer, needs Rupees twenty crores
as additional capital to expand the business. Mr. Amit Joshi, the Chief Executive
Officer (CEO) of the company wants to raise funds through equity. The Finance
Manager, Mr. Narinder Singh, suggested that the shares may be sold to investing
public through intermediaries, as the same will be less expensive.
Name the method through which the company decided to raise additional capital.
Answer:
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 Offer for Sale.
Question :40
Raman who is a broker in a stock exchange has to face fchallenging questions from
society. His own family sometimes asks him to think about his decision to become
a broker. He however, has full faith in the stock exchange. He knows that the
membership of a stock exchange is properly regulated abiding the legal system and
the public doing investment is safe in making deals. His children one day asked him
the reason behind the ups and downs in the stock market. He clarified their doubt
by telling them that forces of supply and demand decide the prices of securities in
the secondary market. Off late he has decided to write a book on the functioning
of stock exchange and its significance in the Indian economy. He is trying to
highlight in his book how through the process of investment and disinvestment
existing securities are sold and resold and savings are channelized into the most
productive opportunities. Definitely Raman is justifying his presence in his job.
What is the meaning of Stock Exchange?
Identify and briefly explain the functions of Stock Exchange discussed in the above
case.
What is an e-IPO?
Answer:
 Stock exchange is a collection of individuals, formed as a body or not,
constituted for the objective of helping, controlling and regulating the dealings
related to buying and selling of securities.
 The different functions of Stock Exchange highlighted in the above case are:
 Ensures safety of transaction. He knows that the membership of a stock
exchange is properly regulated abiding the legal system and the public doing
investment is safe in making deals.
 Helps in deciding pricing of securities. He clarified their doubt by telling them
that forces of supply and demand decide the prices of securities in the
secondary market.
 Helps in contributing to the economic growth. He is trying to highlight in his
book how through the process of investment and disinvestment existing
securities are sold and resold and savings are channelized into the most
productive opportunities.
 When a company proposes to issue capital to the public with the help of on-
line system of the stock exchange and enters into an agreement with it. This
method of issuing of capital to the public is known as e-IPOs.
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Chapter 11 Marketing Management
Question :1
Sunita took her niece, Aishwarya for shopping to ‘Benetton’ to buy her a dress on the
occasion of her birthday. She was delighted when on payment for the dress she got a
discount voucher to get 20% off for a meal of Rs. 500 or above at a famous eating joint.
Identify the technique of sales promotion used by the company in the above situation.
Answer:
 Useable benefits is the technique of sales promotion used by the company in the
above situation.
Question :2
Ginika, Tanish and Rohit were friends from college days and now they are doing different
kinds of business. They regularly meet and discuss their business ideas and exchange notes
on customer satisfaction, marketing efforts, product designing, selling techniques, social
concerns etc.
In one of such meetings, Ginika drew the attention of Tanish and Rohit towards the
exploitation of consumers. She told that most of the sellers were exploiting the consumers
in various ways’ and were not paying attention towards the social, ethical and ecological
aspects of marketing, whereas she was not doing so.
Tanish told that they were under pressure to satisfy the consumers, but stated that the
consumers would not buy or not buy enough unless they were adequately convinced and
motivated for the same.
Rohit stressed that a company cannot achieve its objectives without understanding the
needs of the customers. It was the duty of the businessmen to keep consumer satisfaction
in mind because business is run by the resources made available to them by the society. He
further stated that he himself was taking into consideration the needs of the customers.
Identify the various types of thinking that guided Ginika, Tanish and Rohit in the marketing
efforts of their business. Also, state one more feature of the various types of thinking
identified that is not given in the above para.
Answer:
 The various types of thinking that guided Ginika, Tanish and Rohit in the marketing
efforts of their business are described below:
o (Ginika) Societal marketing concept: The main focus of this philosophy is on both the
needs of the potential buyers as well as concern for the society at large. The ends
include profit maximisation through customer satisfaction and social welfare.
o (Tanish) Selling concept: The main focus of this philosophy is on existing products.
The ends include profit maximisation through sales volume.
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o (Rohit) Marketing concept: The main focus of this philosophy is on customers needs.
The ends include profit maximisation through customer’s satisfaction.
Question :3
Mansi took her niece Ridhima for shopping to ‘Mega Stores’ to buy her a bag for her
birthday. She was delighted when on payment of the bag she got a pencil box along with
the bag free of cost. Idenfity the technique of sales promotion used by the company.
Answer:
 Product combination
Question :4
“Time Line” watch manufacturing company is a renowned company marketing watches. It
performs various activities like, market analysis, product designing or merchandising,
packaging, warehousing, branding, pricing, promotion and selling. The company maintains
good customer relations through various follow up activities. This helps the company in
procuring repeat sales orders.
Name the concept related to the activities mentioned in the above paragraph.
Explain any two features of the concept identified in part (1)
Answer:
 Marketing is the concept related to the activities mentioned in the above paragraph.
 The two features of marketing are described below:
 Needs and wants: Marketing is a social process that seeks to satisfy the needs and
wants of individuals and organisations. Needs are basic to human beings like food,
clothing and shelter and do not relate to a particular product. Whereas wants are
culturally defined human needs which are shaped by multiple factors like personality,
religion, culture etc. Needs are limited whereas wants are unlimited. Therefore, the
success of marketing lies in the competence of the marketer to identify needs of
target
Question :5
Mansi, a shoe manufacturer for school students, decided to maximise profits by producing
and distributing shoes on a large-scale and thus reducing the average cost of production.
Identify the marketing management philosophy adopted by Mansi.
Explain this philosophy on the basis of the following:
Main Focus
Means and Ends
Answer:
 Mansi has adopted the production philosophy.
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 The main focus of this philosophy is on the quantity of products produced.
o Means: The production philosophy can be brought into effect by making products
affordable and widely available.
o Ends: The production philosophy aims at maximizing profits through high volume of
production. customers and develop products to satisfy such needs effectively.
o Creating a market offering: The complete offer for a product or service possessing
certain specific features like size, quality, colour etc. is known as a market offering.
Thus, the success of the marketers lies in their proficiency to create a market offering
in accordance with the needs and wants of the target market. For example a pack of
100 ml of mango juice is available for 20.
Question :6
“Coconut Joy Ltd.” are the manufacturer of vegetarian frozen dessert food products made
with coconut milk, agave syrup and other certified ingredients. The founders of the
company Lovely and Lalita originally developed this treat to meet their own needs but
found that their friends and families around were also keen to use the products. It was not
only the vegetarians, but also those who could not get enough environment friendly
sustainable food, that appreciated the product. It did not take long for Lovely and Lalita to
recognise the potential of their little venture. In the beginning they started from their home
with the product being sold through local family parties that enable guests to personally
meet the owner. This helped to establish strong connections with the prospective buyers
and the company could put the product on shelves of natural food store. The company
used* all marketing activities to grow and expand. The company began sponsoring booths
at festivals, drawing attention to its newly created vegetarian products. It also disseminated
relevant information to media about its products and the people who helped in building the
company’s reputation. Lovely and Lalita were invited for an interview with one of the
leading TV channels in which they talked about their environment friendly vegetarian
products. To show its gratitude to customers, local business and government officials who
supported the company from the beginning, “Coconut Joy Ltd.” hosted a gala event and
involved all of them to raise funds for a few local NGO’s. The company also asked its fans
and customers to send songs and poetry conveying their impression about “Coconut ‘Joy’s
Ltd.” products.
Identify and explain the communication tool used by “Coconut Joy Ltd”. .
Briefly explain the role of the tool identified in (1) above.
Answer:
 Public relations is the communication tool used by “Coconut Joy Ltd”. Public relations
refers to the practice of managing communication between an organisation and its
publics in order to create and maintain a positive image about itself and its products.
 The role of public relations department is described below:
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o Press Relation: It manages relations with the press to present true and correct
information about the company. Thus, public relations helps to create a positive
image about the company in the eyes of various interest holders like consumers,
government, suppliers etc.
o Product Publicity: It undertakes product publicity for new products through
sponsorships. Thus, it helps in launching new products as they may be accepted easily
because of good reputation of business.
o Corporate Communication: It promotes image of the company through different
ways of corporate communication like publication of newsletters, brochures, articles
or arranging for talk shows or speeches of high officials of the company.
o Lobbying: It is proactive in promoting or defending regulations that affect business by
maintaining healthy relationships with associations of commerce and industry,
government officials and different ministers in charge of corporate affairs etc.
Question :7
Good Living Ltd. manufactures mosquito repellent tablets tables. These tablets are packed
in strips of 12 tablets each. Each of these strips is packed in a cardboard box, 48 such boxes
are then placed in a big, corrugated box and delivered to various retailers for sale. State the
purpose of packaging the tablets in a corrugated box.
Answer:
 The purpose of packaging the tablets in a corrugated box is to facilitate their
transportation, warehousing and easy identification.
Question :8
Shreemaya Hotel in Indore was facing a problem of low demand for its rooms due to
off¬season. The Managing Director (MD) of the hotel, Mrs. Sakina was very worried. She
called upon the marketing Manager, Mr. Kapoor for his advice. He suggested that the hotel
should announce an offer of ‘3 Days and 2 nights hotel stay package’ with free breakfast
and one-day religious visit to Omkareshwar and Mahakaleshwar Temples. The MD liked the
suggestion very much. Identify the promotional tool which can be used by the hotel
through which large number of prospective pilgrimage tourists all over the country and
abroad can be reached, informed and persuaded to use the incentive.
Answer:
 Advertising is the promotion tool that can be used by the hotel.
Question :9
“Every time I travelled, people asked me to bring them chips, khakra and pickles from all
over the country,” says Anoushka. Finally, she and her colleague, Sumeet, decided to make
a business out of it. They launched a Facebook page, asked people what they wanted, and
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they came up with a list of about 100 places and tied-up with two dozen vendors to begin
with. They were servicing people from Jaipur who wanted spices from Kerala, people from
Panipat who wanted halwa from Jammu and people from Delhi who ordered fresh tea
leaves from Darjeeling. Through their business, they wished to bridge the gap between
sellers and buyers. The business is now worth millions.
Explain any two important activities that Anouskha and Sumeet will have to be involved in
for making the goods available to customers at the right place, in the right quantity and at
the right time.
Answer:
 Anoushka and Sumeet need to perform the activities involved in physical distribution
of goods.
 Two such activities are explained below:
o Transportation: It creates place utility by facilitating the movement of goods from the
place of production to the place of distribution. In the absence of efficient, reliable
and cost effective transportation, facility marketing of goods is difficult.
o Warehousing: It creates time utility by providing for the storage of goods from the
time they are produced till the time they are sold. Every marketer needs to take this
decision wisely in order to create a balance between the level of customer service
and cost of warehousing.
Question :10
A company was marketing juicers which were very popular due to their quality and after
sales services provided to the customers. The company was a leading company in the
market and earning huge profits. Because of huge profits, the company ignored the after
sales services. As a result, its relations with customers got spoiled and the image of the
company in the public was damaged. The top management became concerned when the
profits for the current quarter fell steeply. On analysis, it was revealed that ignoring the
after sales services was its reason. Therefore, the company took all possible measures to
protect and promote its favourable image. As a result, the goodwill of the company
improved in the society.
Name and state the communication tool used by the marketer in the above case to improve
its image.
Also explain the role of the tool as identified in part (1).
Answer:
 Public Relations is being used as a promotional tool by the marketer. It refers to the
practice of managing communication between an organisation and its publics in
order to create and maintain a positive image about itself and its products.
 The role of public relations as a promotional tool is described below:
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o Public relations helps to create a positive image about the company in the eyes of
various interest holders like consumers, government, suppliers etc .
o It helps in launching new products as they may be accepted easily because of good
reputation of business.
o It helps the business to reinstate itself in the wake of controversies or prejudices etc.
Question :11
Maruti Vega Ltd. entered into the market with coloured televisions and have now
introduced products like audio systems, air-conditioners, washing machines, etc. The
company is not only offering the products but also handling complaints and offering after-
sales services. Identify the element of marketing mix discussed here.
Answer:
 Product is the element of marketing mix discussed here.
Question :12
Radhika was a student of Business Studies of Class XII. Her father was a farmer who grew
different varieties of rice and was well-versed in the various aspects of rice cultivation. He
was also selected by the government for a pilot-project on rice cultivation. As a project
work in Business Studies, she decided to study the feasibility of marketing good quality rice
at a reasonable price. Her father suggested her to use the Internt to gather customers’
views and opinions. She found that there was a huge demand for packaged organic rice. She
knew that there were no predetermined specifications in case of rice because of which it
was difficult to achieve uniformity in the output. To differentiate the product from its
competitors, she gave it the name of ‘Malabari Organic Rice’ and classified it into three
different varieties, namely — Popular, Classic and Supreme, based on the quality. She felt
that these names would help her in product differentiation.
Explain the three functions of marketing with reference to the above paragraph
Answer:
 The three functions of marketing with reference to the above paragraph are
described below:
o Gathering and analyzing market information: The prime focus of marketing is to ‘find
wants and fill them’. Therefore, it is absolutely essential for a company to study the
needs and preferences of its target market in order to satisfy their needs and wants
optimally.
o Standardisation and grading: Standardisation refers to the process of manufacturing
goods as per predetermined specifications. Grading refers to the process of
classifying goods on the basis of certain criteria like quality, size etc. Usually,
agricultural products are subject to grading.
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o Branding: Branding is the process of assigning a name (brand name), sign or symbol
(brand mark) or a combination of all to a product. It is considered to be a very
important decision by the marketers because it facilitates product differentiation.
This helps the company to obtain a desirable market share.
Question :13
Beauty Products Ltd. is a natural and ethical beauty brand famous for offering organic
beauty products for men and women. The company uses plant-based materials for its
products and is the No.1 beauty brand in the country. It not only satisfies its customers but
also believes in the overall protection of the planet.
Identify the marketing management philosophy being followed by ‘Beauty Product Ltd’.
Answer:
 Societal Marketing Concept
Question 14.
‘Haryaram’ is a famous chain selling a large variety of products in the Indian market. Their
products include chips, biscuits, sweets and squashes. It charges a comparatively higher
price than its competitors as it sells quality products. Besides, it offers regular discounts to
its customers and easy credit terms to its retailers. It has five of its own retail shops. It also
sells its products through various grocery stores so that the products are made available to
customers at the right place, in the right quantity and at the right time. It regularly uses
different communication tools to increase its sales.
The above paragraph describes the combination of variables used by Haryaram to prepare
its market offering. Identify and explain the variables.
Answer:
 The combination of variables used by Haryaramto prepare its market offerings are
described below:
o Product: “Their products include chips, biscuits , sweets and squashes.”
A product is anything of value i.e. a product or service offered to a market to satisfy
its needs or wants. A product includes physical product, after ..sale service, handling
grievances etc. Every marketer needs to constantly review and revise its products in
order to enhance customer’s satisfaction and have a competitive edge.
o Price: “It charges a comparatively higher price than its competitors.”
Price is the monetary value paid in consideration for purchase of a product or service
by a buyer to its seller. It is a very crucial decision for the marketers as consumers are
very sensitive to the pricing. The factors affecting price determination are cost of
product, the utility and demand, extent of competition in the market, government
and legal regulations, pricing objectives and marketing methods used.
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o Place: “It has five of its own retail shops.”Or “It also sells its products through various
grocery shops.”
It is considered an important element of marketing mix because it includes all those
activities that help in making the goods and services available to the prospective
buyers in the right quantity, at the right time and in right condition. The two main
decisions involved in physical distribution are physical movement of goods from
producers to consumers and choice of channels of distribution.
o Promotion: “It regularly uses different communication tools to increase its sales.”
Promotion refers to the set of activities undertaken by a marketer to inform the
prospective buyers about the product and persuading them to make a purchase. The
various components of promotion mix are advertising, sales promotion, personal
selling and public relation.”
Question :15
Radha found a worm crawling out of newly opened tetra pack of juice manufactured by a
reputed company, Zest Ltd. She went back to the shopkeeper from whom the pack was
purchased who directed her to call up the customer care centre. When all her efforts fell
free, she went to a consumer activist, group to seek advice. The group decided to help
Radha and take measures to impose restrictions on the sales of the firm’s products of the
particular batch and urge customers to refrain from buying the products of the company.
Zest Ltd. lost its image in the market. The CEO gave the responsibility of bringing back the
lost image of the company to the Manager.
Identify the concept of marketing management which will help the Manager to get the firm
out of the above crisis.
Also explain the role of above identified concept by stating any two points.
Answer:
 Public relations will help the manager to get the firm out of the above crisis.
o Public relations helps to create a positive image about the company in the eyes of
various interest holders like consumers, government, suppliers etc.
o It helps in launching new products as they may be accepted easily because of good
o It helps the business to reinstate itself in wake of controversies or prejudices etc.
Question :16
Zoom Udyog, a car manufacturing company, has started its business with Zoom-800 and
slowly launched Zoom-1000, Wagon-Z, Swy-fy etc. and offered various services like after
sales services, availability of spare parts, etc. Identify the element of marketing mix referred
here.
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Answer:
 Product is the element of marketing mix referred here.
Question 17.
Crackers Ltd., a fire-cracker manufacturing company launched some new products on eve of
Diwali which attracted many buyers. To meet the increased demand, the company
employed children from nearby villages. Although the product was in great demand,
appropriate safety warnings for use were not mentioned on the packets that led to many
accidents.
Identify and explain the important product-related decision that was not taken into
consideration by the company.
Also, identify any two values which were violated by the company.
Answer:
 The company has ignored ‘Labelling’. It is an important product-related decision.
Labelling refers to the process of designing a label for a product containing product
description and other relevant information which is likely to affect a prospective
buyers decision in making a purchase. It may vary from a simple tag to a complex
graphic.
 The two values being violated by the company are:
o Abiding by law as child labour has been employed
o Concern for human life as appropriate warnings were not placed on the label.
Question :18
ABC Crackers Ltd., a fire-cracker manufacturing company, launched some new products on
the eve of Diwali in the market which attracted many buyers. To meet the increasing
demand, the company employed people from nearby villages where there was a lot of
unemployment. Because of the good behaviour of the management with the employees,
more and more people wanted to join the company. As the products were in great demand
in the market, a competitor imitated the products. The products of the competitor were not
accepted by the consumers as it was a status symbol to buy the products of ABC Crackers
Ltd. because of their quality.
Identify and explain the product-related decision because of which consumers preferred the
products of ABC Crackers Ltd.
Also, identify any two values which ABC Crackers Ltd. wanted to communicate to the
society.
Answer:
 Branding is the product-related decision because of which consumers preferred the
products of ABC Crackers Ltd.
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 Branding is the process of assigning a name (brand name), sign or symbol (brand
mark) or a combination of all to a product. Branding facilitates product
differentiation, assists in advertising and display programmes, facilitates differential
pricing , promotes consumers loyalty etc.
 The two values that ABC Crackers Ltd. wants to communicate to the society are:
o Providing good working environment.
Question :19
As a project work in Business Studies, the Commerce students of Himachal Public School,
Himachal Pradesh thought of preparing apple jam from the apples grown in their school
premises and sell it in the school annual fete. They approached the Principal who not only
appreciated the students but also gave her consent for the same. The school decided to
donate 50% of the revenue generated from the sale to a nearby orphanage. After the
school fete, the school also decided to extend this project by providing employment to
visually challenged and disadvantaged sections of society on regular basis.
Explain any two product-related decisions which the students had to take.
Suggest any two functions that the ‘label’ of the jam-bottle must perform.
Identify two values communicated to society by this project of Himachal Public School,
Himachal Pradesh.
Answer:
 The two product-related decisions which the students had to take are branding and
packaging.
 The two important functions that the label of the jam -bottle must perform are:
 Describe the product and specify its contents: The label on the jam bottle must
provide information about the core function of the product i.e. how and why is the
product is likely to be beneficial to the prospective buyer. It should educate them
about the usage and precautions related to the product. It also gives detailed
information about the ingredients of the product.
 Helps in identification of the product or brand: The label should contain the logo,
brand name, tagline, name and address of the manufacturer etc. of the product for
easy identification of the product.
 The two values communicated to the society by the project of Himachal Public School
are:
o Humanity
Question :20
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Ajay was appointed as the marketing head of Alfa Enterprise, a manufacturer of
toothpastes and toothbrushes. His target sale was 2000 units a month. Apart from thinking
about various channels of distribution to achieve the target, he himself started visiting
schools in backward areas. He found that even after taking various steps and counselling,
some school children had not started brushing their teeth. He investigated and found that
they could not start brushing their teeth. He investigated and found that they could not
afford to buy toothbrush and toothpaste. So with due permission, he started donating 200
toothbrushes and toothpastes every month to the school.
Identify the channel of distribution Ajay would adopt for the distribution of toothpaste and
toothbrushes and justify it by giving one reason.
State any two values which Ajay ants to communicate to society.
Answer:
 Ajay would adopt indirect channels of distribution for marketing of toothpaste and
toothbrushes because it is a consumer product. It can be easily marketed through
longer channels, for example (Manufacturer – Wholesaler – Retailer – Consumer).
 The two values that Ajay wants to communicate to the society are:
o Good health
o Social welfare.
Question :21
Amar is engaged in the manufacturing of refrigerators. He surveyed the market and found
that customers need a refrigerator with a separate provision of water cooler in it. He
decided and launched the same refrigerator in the market. Identify and explain the
marketing philosophy involved.
Answer:
 Amar is following the philosophy of marketing concept. The prime focus of marketing
concept is to ‘find wants and fill them’. Therefore, the marketer first assesses the
needs and preferences of its target market and manufactures products accordingly in
order to satisfy their needs and wants optimally. It aims at profit maximization
through customer satisfaction.
Question :22
‘An important task in the marketing of goods relates to designing a label as it provides
useful and detailed information about a product.’ In the light of the above statement, draw
a label for a ‘liquid soap’ and highlight the important information to be provided on it.
Answer:
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 A label for a ‘liquid soap’.
Question :23
Unilever has found a new way to make ice creams by using an ingredient called ‘ice
structuring protein’ which is widely found in nature especially, in fishes which allows them
to survive in freezing arctic waters. Combining ISP with stabiliser technology allows to make
ice creams that don’t melt so easily thereby making it more convenient for small children
and consumers in hot countries.
Identify the component of marketing mix being taken into consideration by the company.
Explain briefly the function of marketing highlighted here.
List any two values that the company wants to communicate to the society.
Answer:
 The component of marketing mix being taken into consideration by the company is
‘Product’.
 Product designing and development: Every marketer strives to achieve his marketing
objectives by creating offerings to satisfy a need or a want. Therefore, one of the core
functions of marketing is to develop the product in the most effective and efficient
way. Every marketer endeavours to add value to his product by introducing constant
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innovations in the product to enhance both its utility and attractiveness in the eyes of
the potential buyers and gain a competitive edge.
o Responsibility towards consumers
o Technological advancement.
Question :24
As a global leader in the consumer electronics and entertainment industries, Sony has set
forth ‘Road to Zero environmental plan’, to achieve a zero environmental’ effect by the year
2050 by producing world-class products in a manner that both protects and promotes a
healthy and sustainable planet.
Identify the marketing philosophy being implemented by the company.
Outline the main focus and ends of the relevant marketing philosophy.
State any two values that the company wants to communicate to the society.
Answer:
 Societal marketing concept is being pursued by the company.
 The main focus of this philosophy is on both the needs of the potential buyers as well
as concern for the society at large. The ends include profit maximisation through
customer satisfaction and social welfare.
 The two values that the company wants to communicate to the society are :
o Concern for the environment
o Welfare of the society
Question :25
As the number of people making online purchases has increased manifolds, there is a
growing concern about the disposal and management of packaging waste. Every item
bought is delivered with excess packaging and sometimes even non-biodegradable
materials are used.
Name the other two levels of packaging that the marketers may be using besides the
immediate package.
Describe briefly any two points highlighting the functions of packaging.
State any two factors that should be kept in mind by the marketers while designing the
packaging of its products.
Answer:
 Secondary packaging and Transportation packaging.
 The functions of packaging in the marketing of goods and services is explained below:
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o Product Identification: Packaging facilitates the identification of the product with the
use of different colours like wrapper of maggi noodles is red whereas yippe noodles
are sold in orange colour packaging. Also, the shape of different brands of cold drinks
bottles is different.
o Product Protection: One of the basic purposes of packaging is to safeguard the
contents of a product from any kind of damage due to mishandling, adverse weather
conditions etc. during the activities related to physical distribution like storing,
transportation etc.
o The marketers should use biodegradable packaging material and packaging should
enhance the usability of the products.
Question :26
Rastro Inc., is a multinational corporation that creates consumer electronics, personal
computers, servers and computer software. The company also has a chain of retail stores
known as Restro Stores. Despite high competition, Restro has succeeded in creating
demand for its products, giving the company power over prices through product
differentiation, innovative advertising and ensured brand loyalty.
What is product differentiation?
Name any one function of marketing that facilitates product differentiation.
Identify the component of promotion mix being used by the company by quoting lines
from the paragraph. .
Describe briefly the pricing objective pursued by the company.
Answer:
 Product differentiation is a strategy used by the marketers to gain an edge over its
competitors by creating a distinguished perception of the product in the minds of the
potential buyers in terms of its utilities.
 Branding is a function of marketing that facilitates product differentiation.
 Advertising is the component of promotion mix being used by the company “giving
the company power over prices through product differentiation, innovative
advertising and ensured brand loyalty.”
 Attaining product quality leadership: Besides aiming at profit maximisation as its
pricing objective Rastro Inc. seeks to establish a unique place for its products in the
market by offering superior quality products which can be easily distinguished from
its competitors. As a result, it is able to use differential pricing i.e. fixing up relatively
higher prices for its products.
Question :27
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Rupali intends to start an enterprise that produces chocolates. Initially, in order to assess
the taste and preferences of the people about the chocolates. She used social media and
online surveys. Thereafter, she prepared a detailed SWOT (strengths, weaknesses,
opportunities and threatsjanalysis of her enterprise to devise a strategy that will give her an
edge over the competitors. Based on her analysis of the market, she decided to launch
sesame and jaggery based chocolates under the brand name ‘Desi Delight’. She has decided
to fix up the price of chocolates relatively at lower level in the beginning and later on as the
demand picks up she may revise the prices.
Identify the elements of marketing mix being taken into consideration by Rupali.
Explain briefly the functions of marketing highlighted here.
Do you think she has selected an appropriate brand name for her product? Why or why
not? Give a reason for your answer.
Answer:
 The elements of marketing mix being taken into consideration by Rupali are Product
and Price.
 The functions of marketing highlighted here are explained below:
o Gathering and analysing market information: The prime focus of marketing is to ‘find
wants and fill them’. Therefore, it is absolutely essential1’for a company to study the
needs and preferences of its target market in order to satisfy their needs and wants
optimally.
o Product designing and development: Every marketer strives to achieve his marketing
objectives by creating offerings to satisfy a need or a want. Therefore, one of the core
function of marketing is to develop the product in the most effective and efficient
way. Every marketer endeavours to add value to his product by introducing constant
innovations in the product to enhance both its utility and attractiveness in the eyes of
the potential buyers and gain a competitive edge.
o Pricing: Price is the monetary value paid in consideration for purchase of a product or
service by a buyer to its seller. The process of determining the price of a product or
service is called pricing. It is a crucial decision for the marketers as consumers are
o Yes, she has selected an appropriate brand name ‘Desi Delight’ for her product as the
name reflects on the product’s benefits and qualities. The word ‘Desi’ indicates that
the product contains indigenous ingredients like sesame and jiggery and Delight
denotes the pleasure that the person is going to get on consuming the delicious
chocolates.
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Question :28
Reema, Vibha and Ratna are three women entrepreneurs who are engaged in dealing with
handicraft goods under the brand name ‘Gujkriti’ through a chain of retail outlets at five
different places in Delhi. They outsource all their products from tribal and rural women in
the state of Rajasthan. Reema is of the opinion that in order to increase the sale of their
products, they should advertise about it on television. But, Ratna is arguing that
advertisement expenses will add to cost of operation. Whereas Vibha is insisting that they
should set up an online portal to market their products across the globe.
Identify the tool of promotion being taken into consideration by Reema by quoting lines
from the paragraph.
How is the channel of distribution being suggested by Vibha different from the channel of
distribution being used by them presently?
Do you think that Ratna is justified in her argument that advertisement expenses will add to
cost of operations?
Answer:
 The tool of promotion being taken into consideration by Reema is advertising.
(Reema is of the opinion that in order to increase the sale of their products, they
should advertise about it on television.)
 Vibha is insisting that they should set up an online portal to market their products
across the globe i.e. adopting direct marketing or zero-level channel (manufacturer –
consumer). Whereas at present they are using indirect channels of distribution i.e.
one level channel (manufacturer – retailer – consumer)by operating through a chain
of retail outlets at five different places in Delhi.
 No, Ratna is not fully justified in her argument although advertising as a tool of
promotion is often criticised on the ground that it adds to the cost of distribution
which is passed on to the consumers in the form of higher prices. Therefore, it
increases the burden on the consumers. But, this argument is not entirely true
because advertisements help to increase demand for the product. In order to meet
the increased demand the production levels have to be raised. As a result, the
business is able to reap advantage of economies of scale and eventually the cost of
production per unit comes down and benefits the buyers as the product’s prices are
reduced consequently.
Question :29
Ravi has decided to set up a small factory to manufacture hand wash and toilet soaps in a
rural area in Haryana. In order to promote the product initially, he plans to distribute small
sachets of the hand wash as free samples, besides deploying a team of salesmen to sell the
product door to door in the different parts of the city. Moreover, he has decided to conduct
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a hygiene camp in rural areas wherein he will distribute a kit comprising of hand wash and
soap and also plans to organize street plays to highlight the importance of hygiene and
sanitation in our daily lives.
Identify the tools of promotion being taken into consideration by Ravi.
What are the qualities that he should consider while selecting salesmen? (any three)
List any two values that the he wants to communicate to the society.
Answer:
 The tools of promotion being taken into consideration by Ravi are Sales Promotion
and Personal Selling.
 Some of the qualities that he should consider while selecting salesmen are described
below:
o Physical appearance: A salesman should have a neat and tidy appearance. He should
be decently dressed up and carry himself well.
o Social qualities: A salesman should be cheerful and confident so that he is able to
communicate assertively without loosing his temper easily.
o Tactfulness and knowledgeable: A good salesman should be alert and intelligent so
that he is able to mould his sales talk as per the need of the situation. He should also
possess good knowledge about the product he will be selling.
 The two values that the he wants to communicate to the society are:
o Improvement in the standard of living of the people
o Educating them about hygiene/cleanliness
Question :30
The Fancy Store’ is a popular retail shop dealing in all kinds of fashionable items. Harish, the
owner of the store believes in pushing the sale of his products through aggressive sales
promotion techniques. Therefore, throughout the year he keeps offering various kinds
short¬term incentives to the buyers like discounts, quantity gifts, product combinations etc.
On the contrary, his brother Ramesh who also runs a retail shop dealing in all kinds of
fashionable items in the nearby market tries to first assess the needs and wants of the
buyers while deciding upon the product range. He also believes in building long term
relations with the buyers and therefore offers only good quality products and handles the
complaints of the buyers if any with politeness and patience.
Identify the two different marketing concepts discussed in the above para.
Distinguish between them on the basis of meaning, scope and strategies used.
Answer:
 The two different marketing concepts discussed in the above paragraph are:
o The Selling concept
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o The Marketing concept
 Difference between Selling and Marketing
Question :31
Arvind is planning to start a company manufacturing room fresheners. He intends to use
natural fruit extracts for adding fragrance to them. He estimates an investment of Rs. 20
crores to set up the factory. As it is difficult for him to raise the entire capital amount alone,
he gives a partnership offer to his school friend, Sanjay who is an angel investor. Sanjay,
after being convinced about the feasibility of the project, accepts his offer. Sanjay tells
Arvind that they should also focus on other important decisions related to the product
‘room fresheners’ besides deciding about its features, variety and quality. Branding is one of
the important such decision.
Name any other two important decisions related to a product.
Why is branding considered as an important function by the marketers? Give any one
reason in support of your answer.
State any four features of a good brand name.
Answer:
 Labelling and Packaging are the two important decisions related to a product.
 Branding is considered to be a very important decision by the marketers because it
facilitates product differentiation. Through branding the prospective buyers are able
to bring about a distinction between a company product and its substitutes available
in the market. This helps the company to obtain a desirable market share.
 The four features of a good brand name are stated below:
o The brand name should be short, easy to pronounce, spell, recognise and remember
e.g., Ponds.
o A brand should suggest the product’s benefits and qualities e.g Sunsilk.
o A brand name should be distinctive e.g., Lotus.
o It should be capable of being registered and protected legally.
Question :32
Somya Patel, 35, a fitness trainer, woes about a popular consumer durable brand saying
that “They show a lot of advertisements for their products on television , but when you go
to the store, you find these things out of stock all the time. Then why should the company
put advertisements when they can’t meet the demand,” she questions.
Identify the tool of promotion mix being referred to in the above lines.
List any two product related factors that are likely to affect the choice of channel of
distribution.
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Which element of marketing mix is being overlooked by the company? Why is it considered
as an important element?
Answer:
 The tool of promotion mix being referred to in the above lines is Advertisement.
 The two product related factors that are likely to affect the choice of channel of
distribution are:
o Type of product (consumer or industrial)
o Unit value of product (low or high)
 Place is the element of marketing mix being ignored by the company. It is considered
important because it relates to making the goods and services available to the
prospective buyers in the right quantity at the right time and in right condition.
Question :33
Suraj is a small entrepreneur involved in the manufacturing of hair wax. He finds that cost
of production of 100 gm of hair wax is Rs. 250. He has decided to keep a margin of 15% as
profit. Moreover, he has assessed that there is a free competition in this product segment.
Identify the function of marketing being performed by Suraj.
State briefly the two factors that he is taking into consideration while performing the
function as identified in part (1).
Answer:
 Pricing is the function of marketing being performed by Suraj.
 The two factors that he is taking into consideration while performing the pricing
function are as follows:
o Cost of product: The price of the product is determined by adding the desired profit
margin to the cost of production, selling and distribution. The cost is of three types
namely the fixed cost, variable cost and semi-variable cost.
o Degree of competition: The nature and extent of competition in the market is
another key factor relating to the pricing decision. If the firm faces free competition
in the market it is likely to fix the price of the product at lower levels. But if it enjoys
monopoly, then the prices are likely to be fixed at higher levels.
Question :34
After doing a diploma in entrepreneurship, Farihad started his own confectionary business.
He started doing a lot of hard work and used the recipes taught by his grandmother in
various preparations. He also learnt many recipes from online sites and television
programmes. He decided to keep the price of the products low initially and also informed
his customers about the goodness of the items sold by them. However, he didn’t mention
on the package of each item weather it contained eggs or not. As a result, vegetarian
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people became hesitant in buying things from his shop as they had to verbally inquire from
him about the inclusion of eggs in the preparation of various items.
Name the important aspect related to the marketing of products which has been ignored by
Farihad.
Explain briefly any three functions performed by the aspect as identified in part (1).
Mention the right of consumer being violated by Farihad.
Answer:
 The important aspect related to the marketing of products which has been ignored by
Farihad is Labelling.
 The three important functions performed by labelling are :
o Describes the product and specifies its contents: Labelling provides information about
the core function of the product i.e. how and why the product is likely to be
beneficial to the prospective buyer. It educates them about the usage and
precautions related to the product. It also gives detailed information about the
ingredients of the product.
o Helps in identification of the product or brand: The label contains the logo, brand
name, tagline, name and address of the manufacturer etc. of the product which helps
in easy identification of the product.
o Enables grading of products: Different coloured labels are also used by the marketers
for grading of the products on the basis of flavours, quality etc. so that the buyers can
easily choose a product as per their requirements.
 The Right to information is being overlooked by the company in the above mentioned
case. According to the Right to information, a consumer has the right to get complete
information about the product he /she intends to buy including its contents, date of
manufacture, date of expiry, price, quantity, directions for use etc. Also, as per law, it
is mandatory for the marketers to provide complete information about the product/
service to the buyers.
Question :35
‘Shudh Hava Ltd/ is engaged in manufacturing of air conditioners and desert coolers. The
company offers a wide range of products to meet the requirements of people from varied
income groups. Recently the company has developed a new product, an air purifier that
improves the quality of air by filtering out all allergens and microbes. The company
introduced the product on two variants namely ‘Nano Tech’ and ‘Nano Tech Premium’. In
order to persuade people to buy the product it is offering easy payment options in equal
monthly instalments for different time periods. Moreover, every buyer will be offered
‘scratch a card’ option to win instant gifts like decorative items, T-shirts etc. The company is
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also planning to organise competitive events based on skill and luck in various malls in
different cities.
Name and explain the ‘type of promotion strategy’ adopted by the company to boost the
sales of air purifiers.
Also, identify the various techniques of this promotional strategy being used by the
company by quoting lines from the paragraph.
“The company offers a wide range of products to meet the requirements of people from
varied income groups.” Name the relevant consumer right being promoted by the company.
Answer:
 The type of promotion strategy adopted by the company to boost the sales of air
purifiers is Sales Promotion.
 Sales Promotion includes the various types of short term incentives offered by a
marketer to increase the sale of a product or service.
 The various techniques of sales promotion being used by the company are listed
below:
 Full finance @ 0% – “it is offering easy payment options in equal monthly instalments
for different time periods.”
 Instant draws and assured gifts – “every buyer will be offered ‘scratch a card’ option
to win instant gifts like decorative items, T-shirts etc.”
 Contests – “The company is also planning to organise competitive events based on
skill and luck in the various malls in the different cities.”
 Right to Choose is the consumer right being promoted by the company
Question :36
Nischay, after completing his masters in computer engineering decided to start his own
business. Fie visited his uncle Mr.Jaiprakash who has been running a successful business in
web designing. Fie shared with Nischay that the main reason for his success in the business
lies in his approach of building a life time relation with his clients. Therefore, his business is
not only restricted to designing web sites according to the specifications of the clients but
also providing continuous online assistance to them and handling their grievances
effectively and doing all this at a profit. lie provides these services at competitive prices.
Anybody interested in getting the web solutions can contact him through his website.
Moreover, whenever the market is sluggish he tries to create demand by offering short-
term incentives to the buyers.
Define the term ‘Marketing Management’.
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Briefly explain the various elements of marketing mix being pursued by Mr. Jaiprakash by
quoting lines from the para.
Answer:
 Marketing management is “the art and science of choosing target markets and
getting, keeping, and growing customers through creating, delivering, and
communicating superior customer value”- Philip Kotler
 The various elements of marketing mix being pursued by Mr. Jaiprakash are as
follows:
o Product: “his business is not only restricted to designing “Web sites according to the
specifications of the clients but also providing continuous online assistance to them
and handling their grievances’ effectively.”
o A product is anything of value i.e. a product or service offered to a market to satisfy
needs or wants. A product includes physical product,after sale service, handling
grievances etc. Every marketer needs to constantly review and revise his products in
order to enhance customer’s satisfaction and have an competitive edge.
o Price: “doing all this at a profit. He provides these services at competitive prices.”
Price is the monetary value paid in consideration for purchase of a product or service
by a buyer to its seller. It is a very crucial decision for the marketers as consumers are
o Place: “Anybody interested in getting the web solutions can contact him through his
website.”
o It is considered important element of marketing mix because it includes all those
activities that help in making the goods and services available to the prospective
buyers in the right quantity, at the right time and in right condition. Two main
decisions involved in physical distribution are physical movement of goods from
producers to consumers and choice of channels of distribution.
o Promotion: “Moreover, whenever the market is sluggish he tries to create demand by
offering short-term incentives to the buyers.”
o Promotion refers to the set of activities undertaken by a marketer to inform the
prospective buyers about the product and persuading them to make a purchase. The
various components of promotion mix are advertising, sales promotion, personal
selling and public relation.
Question :37
In today’s world, through social media, news spread in a flash. Moreover, if it is bad news, it
acquires a speed that is virtually impossible to stop. Hence, all corporates are more
susceptible to a tarnished image today than in any other day and age. The loss of goodwill
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may lead to decreased revenue, loss of clients or suppliers and fall in market share. Over
the years, therefore, most of the companies have set up a separate department to manage
the public opinions about them. The department works in close coordination with the
various interest groups like consumers, government, suppliers etc. and strives to handle
effectively if any controversies arise.
Identify the element of promotion mix being referred to in the above lines.
Briefly explain any three points highlighting the role of this element of promotion mix as
identified in part (1)
Answer:
 The element of promotion mix being referred to in the above lines is Public Relations.
 Public relations helps to create a positive image about the company in the eyes of
various interest holders like consumers, government, suppliers etc .
 It helps in launching new products as they may be accepted easily because of good
 It helps the business to reinstate itself in wake of controversies or prejudices etc
Question :38
Suyash is very thirsty. He is in the middle of a desert. Soon he finds a cold drinks’ shop. He
goes and purchases three bottles and drinks them to satisfy his thirst. After drinking the
cold drink he realises that it has been developed after analyzing the needs and preferences
of the potential customers. On observing the outer side of the bottle he finds details like
contents, flavour, size, prize, etc.
What is ‘Cold Drink’ and ‘Thirst’ here in relation to each other?
Identify one feature of marketing which has been highlighted here?
How is cold drink a good market offer here?
Answer:
 ‘Cold Drink’ is ‘want’ here and ‘Thirst’ is ‘need’.
 One feature of marketing which is highlighted here is ‘Creating a Market Offering’. On
observing the outer side of the bottle he finds details like contents, flavour, size,
prize, etc.
 A cold drink is a good market offer as it has been developed after analyzing the needs
and preferences of the potential customers.
Question :39
Identify the true exchange mechanisms in the following cases:
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1. Rajeev was a hardworking stationery shop keeper. One day when he was standing in
front of the mirror he took money from one of his pockets and took out a pen from
the other. He allocated ?100 for the pen and decided to keep the pen for his personal
use. In the coming days he utilized the pen properly and was satisfied with if.
2. Kiran was a book seller. One day she was selling books. She approached a person who
was sitting on a pavement. She offered her a book and found that he was not having
enough money to pay. So she willingly gave her the book without taking money.
Answer:
1. No, it was not a true exchange mechanism as a true exchange mechanism requires at
least two parties.
2. No, it is not a true exchange mechanism as both the parties should be capable of
giving something of value to each other.
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Chapter 12 Consumer Protection
Question :1
Indian Youth Organisation (IYO) organised a visit of its members to an old age home to
inculcate the habit of social work among them. The visit revealed that the living conditions
of the inmates of the old age home were not hygienic. So, the IYO members decided to
clean the premises. During their cleanliness drive, they realised that the old age home also
required pest control. But some of the inmates of old age home were reluctant for it
because they believed that the pest control may create health problems for them. IYO,
therefore decided to provide ethical, safe and odourless pest control. They showed to the
inmates of old age home a pamphlet of the proposed pest control product which promised
easy, inexpensive and long-lasting pest control. The inmates happily agreed and the pest
control was carried out. It worked for a fortnight but to their dismay the effect started
wearing off. IYO contacted the pest control company which kept on postponing their visit.
After waiting for a month, IYO filed a cased in the consumer court.
The consumer court was satisfied about genuineness of the complaint and issued necessary
directions to the pest control company.
State the six directions that might have been issued by the court.
Also identify any two values that are being communicated by IYO to the society.
Answer:
 The six directions that might have been issued by the court are as follows:
o Reliefs available to a consumer
o To remove the deficiency in service.
o To refund the charges paid for the service.
o To pay a reasonable amount of compensation for any loss or injury suffered by the
consumer due to the negligence of the opposite party.
o To discontinue the unfair/restrictive trade practice and not to repeat it in the future.
o To pay any amount (not less than5% of the value of the d effective goods or deficient
services provided), to be credited to the Consumer Welfare Fund or any other
organisation/person, to be utilised in the prescribed manner.
o To issue corrective advertisement to neutralise the effect of a misleading
advertisements.
 The two values that are being communicated by IYO to the society are:
o Social service
o Promoting health and hygiene
Question :2
Ronit Raj, a marketing manager is a patient of diabetes for which he takes medicines
regularly. One day, on his tour to Patna, he met with an accident and was hospitalised. Due
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to doctor’s negligence a delicate nerve of his right leg was cut rendering hum crippled
throughout his life. Identify the consumer right that has been violated by the doctors under
the Consumer Protection Act, 1986 in the above situation.
Answer:
 Right to safety is the consumer right that has been violated by the doctors under the
Consumer Protection Act, 1986 in the above situation.
Question :3
Sirajuddin purchased a car for Rs. 15 lacs from an automobile company and found that its
airbags were defective. After many complaints with the company that went unheard, he
filed a case in the District Forum. He was not satisfied with the orders of the District Forum.
He then appealed before the State Commission and on being dissatisfied with the orders of
State Commission, he appealed before the National Commission. Sirajuddin was not
satisfied with the orders of National Commission. Suggest him the highest authority where
he could appeal against the decision of the National Commission.
Answer:
 Sirajuddin cannot appeal to any other higher authority. This is because only those
matters which have been directly filed in the National Commission and where the
value of goods and services in question along with the compensation claimed exceed
1 crore are appealable before Supreme Court.
Question :4
“Grahak Shakti”, an N.G.O. organized a workshop to discuss various issues relating to
consumers. During the discussion, one of the members drew attention towards exploitation
of consumers due to defective and unsafe products, adulteration, black marketing, hoarding
etc. To this another member argued that consumers themselves are responsible as they do
not raise collective voice against the exploitation. The Chairperson of the organization was
of the opinion that it was also the duty of the businessman to take care of the interests of
various stakeholders. Business organizations earn money by selling goods and services to
consumers. So the interests of the stakeholders have to be well taken care of.
State three points that highlight the need for consumer protection as discussed in “Grahak
Shakti’s workshop.
Answer:
 The three points that highlight the need for consumer protection as discussed in
“Grahak Shakti’s workshop are described below:
o Widespread exploitation of consumers
o Unorganized consumers
o Social responsibility.
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Question :5
Manuj bought a packet of chips from a local shopkeeper and found that the ingredients
given on the label were not legible. He complained about it to the company. The company
sent a written apology stating that they will make sure that existing packets are withdrawn
from the market and new packets with legible labels are soon made available. State the
consumer right which Manuj exercised.
Answer:
 Right to be heard has been exercised by Manuj.
Question :6
Suman bought a box of cheese of a reputed brand from a local shopkeeper. On opening the
box, she found a piece of stone in the cheese. She reported the matter to the shopkeeper
who forwarded her complaint to the concerned company. Within a week, the
representative of the company visited Suman’s residence with an apology and as a
replacement offered her a new cheese pack with four other varieties of cheese as
compensation for the inconvenience to her. State the consumer right with Suman
exercised.
Answer:
 Right to seek redressal has been exercised by Suman.
Question :7
Manvendra always went to a specific shop to buy all consumable and non-consumable
goods. In this shop, a variety of products of different brands were displayed nicely and the
salesperson available also gave good sales presentations if required. But this shop was quite
far-off from his residence. His friend Annant always wondered why Manvendra wastes so
much time in going to that shop whereas there were many big brand shops situated near
his residence having consumable and non-consumable goods.
Annant asked Manvendira the reason of going to that particular shop. Manvendra told that
he was exercising one of his rights which he could not exercise in nearby big brand shops.
State the consumer’s right which Manvendra had exercised.
Answer:
 Right to choose has been exercised by Manvendra.
Question :8
Vasvi purchased a bottle of pickle from the local grocery shop. The information provided on
the bottle was not clear. She fell sick on consuming it. She filed a case in the District Forum
under the Consumer Protection Act and got the relief.
Identify the important aspect neglected by the marketer in the above case.
Explain briefly the functions of the aspect identified in (1) above
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Answer:
 The marketer had overlooked the Labelling as it was not done appropriately for the
product
 The functions of labelling are detailed below:
o Describes the product and specifies its contents: Labelling provides information about
beneficial to the prospective buyer. It educates them about the usage and
Question :9
Aman, a degree holder in Entrepreneurship came to know about Piplantri Village located in
Rajasthan, where in 2006 an initiative was started in which 111 trees are planted every time
a girl child is born.
To keep termites away from the trees the villagers have planted 2.5 million Aloe Vera plants
around the trees. This has turned the village into an oasis, as the planting of trees led to
higher water levels.
Aman decided to visit the village to start a business unit, for the processing and marketing
of Aloe Vera into juices, gels and other products.
However, on visiting the village Aman found that the villagers were suffering exploitation at
the hands of local merchants who were engaged in unscrupulous, exploitative trade
practices like hoarding and black marketing of food products and also selling unsafe and
adulterated products to the villagers.
After looking at their plight, instead of a business organisation, he decided to set up an
organisation for the protection and promotion of the consumer interest of the villagers.
State the functions that the organisation established by Aman will be performing. (Any six
points).
Answer:
 Aman has set up an NGO or consumer organisation in the village for the protection
and promotion of the consumer interests.
 The key functions highlighting the role of a consumer association are listed below:
o Educating the general public about consumer rights by conducting training
programmes, conferences and workshops.
o Publishing periodicals and other publications to give knowledge about consumer
problems, legal reporting, reliefs available and other matters of interest.
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o Carrying out comparative testing of consumer products in accredited laboratories to
test relative qualities of competing brands and publishing the test results for the
benefit of consumers.
o Encouraging consumers to strongly protest and take an action against unscrupulous,
exploitative and unfair trade practices of sellers.
o Providing legal assistance to consumers by way of providing aid, legal advice etc. in
seeking legal remedy.
o Filing complaints in appropriate consumer courts on behalf of the consumers.
Question :10
Himesh, after completing his graduation, started working with a multinational company in
Delhi. But due to ill health of his parents, he had to go back to his village. There he noticed
that the villagers were literate but ignorant about their rights. Many vegetable vendors
were using stones as weights to sell their vegetables. Some shopkeepers were selling food
items without having the ‘FPO Mark’. The villagers did not find anything wrong with these
practices. So, to create awareness among the villagers, Himesh decided to publish a weekly
journal ‘Jan Jagriti.’ State the right which Himesh has exercised by doing so.
Answer:
 Right to consumer education has been exercised by Himesh.
Question :11
On Sonika’s birthday, her mother gave her a pair of gold earrings. After one month, Sonika
observed that the earrings were losing their shine. She checked the mark on the earrings
and found that it was not a proper Hallmark and her mother had been cheated by the
shopkeeper. So, she filed a complaint in the District Forum which rejected it. Not satisfied
by the decision of the district Forum, she was very much disturbed and after two months,
she decided to appeal further.
Can Sonika appeal against the decision of the district forum? Give reason in support of your
answer.
Answer:
 No, Sonika will not be able to appeal further in the State commission. This is because
two months have already passed and the appeal had to be filed within 30 days of the
passing of the order by the District Forum.
Question :12
Himanshu purchased a new car from ‘Galaxy Motors’ for Rs. 25 lakh. He was offered free
insurance for the first year and three free servicing to be availed after the car had covered
5,000 km, 10,000 km and 15,000 km, respectively. When Himanshu took the car for the first
free servicing, he was told that the car was not new and first service had already been
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availed on this car. He felt cheated and filed a complaint in the State Commission. Being not
satisfied with the decision of the State Commission, after two months he decided to file an
appeal against it.
Can Himanshu appeal against the decision of the State Commission? Give reason in support
of your answer.
Answer:
 No, Himanshu will not be able to appeal further against the decision of State
Commission in the National Commission. This is because two months have already
passed, and the appeal had to be filed within 30 days of the passing of the order by
State Commission.
Question :13
Palak went to a shopkeeper to buy a hair oil. The shopkeeper forced her to buy a particular
brand of hair-oil out of various available brands, irrespective of the willingness of Palak.
Which right of Palak, as a consumer, has been violated? Name and explain the right.
Answer:
 The Right to choose has been violated in the given case as Palak was forced by the
shopkeeper to buy a particular brand of hair oil.
 According to the Right to Choose, the consumer has a right to choose from a variety
of products at competitive prices. Also, the marketers should offer a wide variety of
products to buyers.
Question :14
Harsh asked for a bottle of mineral water from a shopkeeper. The maximum retail price
printed on the bottle was Rs. 12 only whereas the shopkeeper was charging Rs. 35. In spite
of many arguments, the shopkeeper was not ready to sell the bottle for less than Rs. 35.
Harsh was in need of it and had no option except to buy. As an aware consumer, name and
explain the right which Harsh can exercise.
Answer:
 As an aware customer, Harsh can exercise his Right to be Heard. The consumer has a
right to be of a complaint and to be heard in case he/she is dissatisfied with a product
or a service.
Question :15
Anita purchased a book from Satish Book Store. While reading the book, she found that
sixteen pages were missing. She approached the seller of the book and complained about
the missing pages. The seller promised that if the publisher was ready to change the book
he would change the same. After a week, the seller informed Anita that the publisher had
refused to change the book.
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Where can Anita file a complaint against the seller of the book? Give reason in support of
your answer. Also explain who is a consumer as per “Consumer Protection Act 1986”.
Answer:
 Since, the value of the goods or services in question, along with the compensation
claimed, does not exceed Rs. 20 lakhs she will file a case in the District Forum.
 A ‘consumer’ is generally understood as a person who uses or consumes goods or
avails of any service. A person who buys goods for commercial purpose or resale will
not be considered to be a consumer.
Question :16
Prakhar purchased an ISI mark electric iron from Bharat Electricals. While using it, he found
that it was not working properly. He approached the seller and complained about the same.
The seller satisfies Prakhar by saying that he will ask the manufacturer to replace the iron.
The manufacturer refused to replace and Bharat Electricals decided to file a complaint in
the consumer court.
Can Bharat Electricals do this? Why? Also explain who is a consumer as per Consumer
Protection Act, 1986.
Answer:
 No, Bharat Electricals will not be able to file a complaint under Consumer Protection
Act 1986 because according to this act a person is not deemed to be a customer if he
buys goods for resale or commercial purpose.
 Under the Consumer Protection Act 1986, a consumer is defined as:
 Any person who buys any goods for a consideration, which has been paid or
promised, or partly paid and partly promised or under any scheme of deferred
payment. It includes any uses of such goods, when such use is made with the
approval of the buyer, but does not include a person who obtains goods for re-sale or
any commercial purpose.
 Any person who hires or avails of any service, for a consideration which has been paid
or promised or partly paid and partly promised or under any system of deferred
payment. It includes any beneficiary of services when such services are avails of such
services for any commercial purposes.
Question :17
Reena purchased one litre of pure desi ghee from a shopkeeper. After using it, she had
doubts that it was adulterated. She sent it for a laboratory test which confirmed that the
ghee was adulterated. State any six reliefs available to Reena if she complains and the
consumer court is satisfied about the genuineness of the complaint.
Answer:
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 The six reliefs available to Reena are listed below:
o To withdraw the hazardous goods from sale.
o To provide replacement for the defective product.
o To refund the price paid for the product, or the charges paid for the service.
consumer due to the negligence of the marketer.
o Not to offer hazardous goods for sale.
o To issue corrective advertisement to neutralise the effect of a misleading
advertisement.
Question :18
A few days back in Uttar Pradesh, an ATM of a nationalized bank in Shahjahanpur dispensed
counterfeit Rs. 2,000 notes. The victim Puneet Gupta, who withdrew a total of Rs. 10,000,
was shocked when he found that one of the five notes he withdrew was a scanned copy,
but the bank refused to change it. They, in fact, even refused to acknowledge that the note
came out of their ATM. His friend Avneet who is banker told him that as per the Reserve
Bank directive issued in May 2012, no bank can put back into circulation currency notes
(of Rs. 100 and higher denominations) received by them, without first processing them for
authenticity. Moreover he suggested to him to exercise a particular right and ask the bank
for evidence on the kind of steps being taken by the bank to stop fake notes entering the
ATM and also the number of complaints that they have received so far from consumers
about fake notes coming out of their ATMs.
Identify and explain the right of consumer that Puneet Gupta has been suggested to
exercise by his friend in the above case.
List any two values being ignored by the bank.
Answer:
 Puneet Gupta has been suggested to exercise Right to information by his friend in the
above case.
 According to the Right to Information, the consumer has the right to get complete
information about the product that he/she may propose to buy including its contents,
date of manufacture and expiry, maximum retail price, quantity, directions for use
etc. Moreover, as per law, it is mandatory for the marketers to provide complete
information about the product/service to buyers.
 The two values being ignored by the bank are:
o Responsibility
o Loyalty
Question :19
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‘Vastra Ltd.’ is engaged in the manufacturing of apparel. Over the years, it has become a
popular brand due to its good product quality and exclusive designing. The company plans
to open its own retail showrooms in metropolitan cities in India. In order to meet its
financial needs, it has offered for subscription an IPO of Rs. 4 lakh equity shares in the price
band of Rs. 430 – Rs. 445 each. As per the guidelines of SEBI, the company has provided a
complete disclosure of the relevant details in its prospectus.
Identify and explain the right of the consumer being fulfilled by the directives of SEBI in the
above-mentioned case.
Briefly explain any two points highlighting the importance of consumer protection from the
point of view of the businessmen.
Answer:
 The Right to information is being fulfilled by the directives of SEBI in the above-
mentioned case.
 According to the Right to information, the consumer has the right to get complete
information about the product that he/she may propose to buy including its contents,
date of manufacture and expiry, maximum retail price, quantity, directions for use
etc. Moreover, as per law, it is mandatory for the marketers to provide complete
information about the product/service to buyers.
 The importance of consumer protection from businessmen’s point of view is outlined
below:
o Long-term interest of business: In order to ensure long term interest of business it is
important that businessmen strive to earn profits only through consumer
satisfaction. This will not only ensure the survival of business but also lead to its
growth in the future.
o Business uses society’s resources: Since a business employs society’s resources to
create offerings so they need to safeguard the consumer’s interests.
Question :20
HomeShop18 is an online and on-air retail and distribution venture of the Network 18
Group, India. It is a part of the Networkl8 Media and Investments Limited which is owned
and operated by Reliance Industries. Currently, HomeShopl8.com comprises of more than
15 categories namely, Mobiles, Health & Beauty, Apparel, Jewellery, Home & Kitchen,
Household Appliances etc. to name a few. The company offers a wide variety of goods
under each of these categories.
Identify and explain the relevant consumer right being promoted by the company.
Also mention any two values being reflected through this approach adopted by the
company.
Answer:
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 The Right to Choose is being promoted by the company. According to the Right to
Choose, the consumer has a right to choose from a variety of products at competitive
prices. Also, the marketers should offer a wide variety of products to buyers.
 The two values being reflected through this approach adopted by the company are
increasing standard of living and technological development.
Question :21
In one of the cases, the Goa State Commission held that “The Consumer Protection Act is
not for entertaining or compensating speculative transactions or losses”. It held that
compensation cannot be given under the Consumer Protection Act to those involved in sale
and purchase of shares, which are commercial transactions. The order follows an appeal by
a Mumbai-based stockbroker India Infoline Limited against an order of the Goa District
Consumer Forum. Initially, the judgement of the Goa District Consumer Forum had awarded
damages to Panaji- resident Vaman Nagesh who had lost money in share trading through a
stockbroker India Infoline Limited.
Why do ‘commercial transactions’ not fall under the purview of ‘consumer’ under the
Consumer Protection Act?
Why do you think that the above-mentioned case was initially filed in the Goa District
Forum by Vaman Nagesh?
Where do you think Vaman Nagesh could have filed a further appeal in case he was not
satisfied with the judgement passed about his case by the Goa State Commission?
Answer:
 Under the Consumer Protection Act, a ‘consumer’ is generally understood as a person
who uses or consumes goods or avails of any service. However, a person who buys
goods for commercial purpose or resale will not be considered to be a consumer.
 Presuming that the value of the securities, along with the compensation claimed, did
not exceed Rs. 20 lakhs, the above mentioned case was initially filed in the Goa
District Forum by Vaman Nagesh.
 If, Vaman Nagesh was not satisfied with the order of the State Commission, he could
have filed an appeal before the National Commission within 30 days of the passing of
the order.
Question :22
After completing his education, Arman opened a small restaurant in a posh market to earn
his livelihood. In order to attract good clientele, he decided to install two air conditioners in
the restaurant. Since he didn’t have sufficient funds to buy air conditioners of a good brand,
he bought two air conditioners from a local manufacturer in Janakpuri, Delhi for Rs. 20,000
each. Later on, he found that the compressor of one of the air conditioner was not working
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properly. Despite many complaints, the defect was not rectified by the manufacturer. So, he
feels very disappointed about the issue and wants to take a legal action against the
manufacturer to not only get compensation but also to save other people from being duped
by the local manufacturer.
Name the redressal agency to which he can approach to file complaint against the local
manufacturer.
State any two directions which the consumer court can issue to the local manufacturer after
being satisfied with the genuineness of the complaint.
State any two values being ignored by this automobile company.
Answer:
 He can approach the District Forum to file complaint against the local manufacturer.
 The two directions which the consumer court can issue to the local manufacturer
after being satisfied with the genuineness of the complaint are as follows:
o To remove the defect in goods.
o To provide replacement for the defective product
 The two values being ignored by the local manufacturer are:
o Honesty
o Concern for people.
Question :23
On her sister’s wedding, Radha decided to gift her gold earrings. When she shared her plan
with her husband, he showed her an article in the daily national newspaper under the
heading “Jago Grahak Jago.” The campaign included details about the various aspects that
people must consider before buying any gold jewellery.
Why do you think campaigns like “Jago Grahak Jago” are inserted in the newspaper?
Name the right of consumer being fulfilled through this initiative of the government
State any three responsibilities that Radha must discharge as an aware consumer while
buying her sister’s wedding gift.
Answer:
 The campaigns like “Jago Grahak Jago” are given in the newspaper to make the
consumers aware of the various undesirable activities like unscrupulous, unfair trade
practices etc which are carried out by the marketers to exploit the buyers.
 Right to Consumer Education is being fulfilled through this initiative of the
government.
 The three responsibilities that Radha must discharge as an aware consumer while
buying her sister’s wedding gift are as follows:
o Buy only standardised goods and check for standardization mark like Hallmark for
gold jewellery.
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o Assert herself to ensure that she gets a fair deal.
o Ask for a cash memo on purchase of goods or services.
Question :24
In the year 2015, Under section 12(1D) of the Consumer Protection Act, the Consumer
Affairs Ministry had filed a suit in National Consumer Disputes Redressal Commission
(NCDRC) against Nestle India, the manufacturer of Maggi noodles, seeking about Rs. 640
crores in damages for alleged unfair trade practices, false labelling and misleading
advertisements.
Name any two other two parties besides government who can file a case under Consumer
Protection Act 1986.
Why has the government filed a suit in National Consumer Disputes Redressal Commission
(NCDRC) and at no other level of three tier redressal system?
Answer:
 The two other two parties besides government who can file a case under Consumer
Protection Act 1986 are any consumer and any registered consumers’ association.
 The government filed a suit in National Consumer Disputes Redressal Commission
(NCDRC) and at no other level of the three tier redressal system because a complaint
has to be made to the National Commission only when the value of the goods or
services in question, along with the compensation claimed, exceeds 1 crore.
Question :25
Good Health Ltd., a pharmaceuticals company, has introduced mosquito repellent bands
under the brand name ‘Jaddu’ in the wake of outbreak of Dengue in various parts of the
country. The product attracted many people from all age groups, especially kids. However,
the company failed to provide adequate guidance for the users on the label of the product
in terms of time period of the effectiveness of the repellent band once its seal is opened.
Because of this ambiguity, many buyers faced problems.
Identify and explain the consumer right which has been overlooked by the company.
Name and explain any two functions of the important product related aspect ignored by the
company.
Answer:
 The Right to information is being overlooked by the company in the above mentioned
case.
 According to the Right to information, a consumer has the right to get complete
information about the product he/she intends to buy including its contents, date of
manufacture, date of expiry, price, quantity, directions for use etc. Also, as per law, it
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is mandatory for the marketers to provide complete information about the product/
service to the buyers.
 The important aspect related to the marketing of products which has been ignored by
the company is Labelling.
 The two important functions performed by labelling are:
o Describes the product and specifies its contents: Labelling provides informationabout
beneficial to the prospective buyers. It educates them about the usage and
Question :26
Radheshyam moved from Muradabad to Mumbai to work as an artist in television serials.
On getting his first salary, he opened an account in a nearby commercial bank and also
opted for ATM facility under ATM card. After a few months, he lost his ATM Card and
lodged a request with the bank for furnishing a duplicate card. Consequently, he was
allotted duplicate ATM Card Number, but that card was not given to him. After a week, he
received a SMS message on his mobile stating that sum of Rs. 10,000/- has been withdrawn
from his account. Since the duplicate ATM card was not given to him, he brought the debit
entry in the notice of the bank. The bank assured to repay that amount to him within 15
days after investigating the issue. But more than a month has passed since then and despite
his persistent efforts the bank has not taken any action so far. So, he files a case against the
bank in the district forum. The consumer court can issue a notice to the bank after being
satisfied with the genuineness of the complaint and directs the bank to repay Rs. 10,000 to
Radheshyam along with a compensation of Rs. 50,000.
Name the rights exercised by Radheshyam in the context of the above case.
Answer:
 The two rights exercised by Radheshyam in the context of the above case are Right to
be heard and Right to seek redressal.
Question :27
Bharti Airtel Limited is an Indian global telecommunications services company
headquartered in New Delhi, India. It operates in 20 countries across South Asia, Africa, and
the Channel Islands. It provides GSM, 3G and 4G LTE mobile services, fixed line broadband
and voice services depending upon the country of operation. It is the largest mobile
319
network operator in India and the third largest in the world with 325 million subscribers. Its
portal displays the following information
“Airtel Mobile Customer Care – Call 121, 24-hr Airtel customer service number from your
Airtel phone. In case you don’t get satisfactory resolution of your query/complaint at the
Airtel customer service centre, you can get in touch with Airtel Nodal officers with your
complaint reference number and details of grievance.”
Identify and explain the right of the consumer being fulfilled by the company in the above-
mentioned case.
Name the function of marketing being performed by the company.
State any two values that the company wants to communicate to the society.
Answer:
 The right of the consumer being fulfilled by the company in the above mentioned
case is right to be heard.
 The function of marketing being performed by the company is customer support
services.
o Concern for consumers
o Respect for law.
Question :28
Suryansh booked a flat through a private builder in Greater Noida, Uttar Pradesh at the cost
of ? 2 crores. As per the terms of the contract, the builder promised to provide him with all
the basic and modern amenities such as continuous electric supply, CCTV Camera, Club
facility, good quality of water, good security etc. Although he was given the possession of
the flat in time, the builder did not provide all the basic and common facilities which also
included 3 tier security having CCTV camera coverage for each floor. Suryansh kept
complaining to the builder after possession of the flat for non-installation of CCTV camera
and other common and basic amenities as promised at the time of agreement, but the
builder kept assuring him that he will do the needful and he need not worry. After a month,
Suryansh had to travel abroad, so he left his home with his flat duly locked. But on his
return, he found that his flat has been robbed and theft of 10,000 and Jewellery worth ? 10
Lac had taken place. He complained to the builder that had CCTV cameras been installed, it
would have been a deterrent and the theft would not have been taken place. Also, CCTV
would have ensured that no unwanted person would have entered the building. When
Suryansh discussed this incident with his friend Sooraj, who runs a consumer association, he
advised him to file a case against the builder.
Name the right of consumer that Sooraj has advised Suryansh to exercise.
320
State any three functions highlighting the role of a consumer association.
Answer:
 Sooraj has advised Suryansh to exercise Right to be heard.
 The three functions highlighting the role of a consumer association are listed below:
o Educating the general public about consumer rights.
o Conducting comparative testing of consumer products available in the market.
o Filing complaints in appropriate consumer courts on behalf of the consumers.
Question :29
Gaurav purchased a pack of sweets for his son from a shop in the nearby market. After
consuming those sweets, the condition of his son deteriorated and he had to be
hospitalized. Later on through a laboratory test, it was certified that the sweets were
adulterated.
State any one precaution that he should have taken while purchasing packed sweets.
Name the appropriate redressal agency that he can approach in case he decides to file a
case against the shopkeeper.
State any two values which are lacking in the shopkeeper.
Answer:
 Gaurav should have checked for the quality assurance mark like FPO /FSSAI on its
label while purchasing the food product.
 District Forum
 The two values which are lacking in the shopkeeper are:
o Honesty
o Concern for others.
Question :30
Aryan went to purchase a pack of chocolate for his son from a shop in the nearby market.
Despite his preference to buy a pack of a particular brand the shopkeeper forced him to buy
the pack of chocolate of another brand, by giving some odd justifications. After coming back
home, Gaurav was feeling very dissatisfied.
Identify and explain the right of the consumer being violated in the above mentioned case.
Briefly explain any two points highlighting the importance of consumer protection from the
consumer’s point of view.
Answer:
 The Right to choose has been violated in the given case as Aryan was forced by the
shopkeeper to buy a particular brand of chocolate.
321
 According to the Right to Choose, the consumer has a right to choose from a variety
of products at competitive prices. Also, the marketers should offer a wide variety of
products to buyers.
 The importance of consumer protection from consumer’s point of view is outlined
below:
o Consumer Ignorance: In order to remove their ignorance, it is essential that the
consumers are made aware of their rights and responsibilities.
o Widespread Exploitation of Consumers: In pursuit of higher profits the businessmen
are likely to resort to unfair trade practices like charging higher price, selling
adulterated products, deficiency in services etc. Thus, there is a need to curb this kind
of widespread exploitation of consumers.
Question :31
Geeta goes to a doctor to get herself treated for an injury in her hand. The doctor being her
distant relative charged her nothing for the treatment. However, after a few days she
develops an infection on the wound because the doctor didn’t use sterilised instruments.
Later on, she is advised by the surgeon to get the infected finger removed. Therefore, she is
very angry with the doctor.
Can Geeta file a case against the doctor if she decides to take a legal action? Why or why
not? Give a reason in support of your answer.
Answer:
 No, Geeta cannot file a case against the doctor because she is not a consumer
because she didn’t pay for the services.
Question :32
Abhishek bought a bottle of disinfectant spray from the nearby market. It had a knob which
was to be opened in a particular way. However, there was no instruction on its package in
this regard. Therefore, when he tried to open the knob in a casual way, some of the spray
flew in his eyes. This affected his vision.
Name the rights of consumer being violated by the company.
State any two directions which the consumer court can issue to the company after being
satisfied with the genuineness of the complaint.
Answer:
 The two rights of consumer being violated in the above case are Right to information
and Right to safety.
 The two directions which the consumer court can issue to the company after being
satisfied with the genuineness of the complaint are as follows:
322
o Not to offer hazardous goods for sale.
consumer due to the negligence of the marketer.
Question :33
Ved purchased some medicines worth Rs. 1000 for his wife from a chemist in the nearby
market. But, he didn’t take the cash memo for it from the chemist. After taking those
medicines the condition of his wife deteriorated and she had to be hospitalized. Later on
through a laboratory test it was certified that the medicines were spurious.
Can he file a case against the chemist? Justify your answer with the help of a suitable
reason.
State any two values which are lacking in the chemist.
Answer:
 No, he cannot a case against the chemist as he didn’t take the cash memo for it from
the chemist. A cash memo is the conclusive proof of the purchase of goods.
 The two values which are lacking in the chemist are:
o Humanity
o Trustworthiness.
Question :34
Rajiv bought an electric geyser. One day while taking bath he felt an electric shock. He
quickly called the company and asked the concerned
person to replace the geyser or fix the problem. There was no response from the side of the
company. The geyser was still in the warranty period. Later from other neutral sources lie
came to learn that many other people have also felt the same problem and it is because the
product is made up of substandard components.
In the above case identify the consumer rights violated.
Answer:
 Following are the consumer rights violated in the above case:
o Right to Safety. Many other people also have felt the same problem and it is because
the product is made up of substandard components.
o Right to Seek Redressal. There was no response from the side of the company. The
geyser was still in the warranty period.
Question :35
Adesh had some problem walking on the road. He purchased a pair of shoes with high
heels. After some time of using these shoes his pain increased as he did not know that there
were medically recommended shoes available in the market for this problem. After a few
days of giving himself rest he approached a shop where the medically recommended shoes
323
were sold. He was amazed to learn that the company making the shoes was holding
workshops at different places in order to make the people suffering with such problem
aware of an available option.
Which consumer responsibility was not fulfilled by Adesh?
Which right has been helped protected by the company selling the medically recommended
shoes?
Answer:
 The consumer responsibility not fulfilled by Adesh is ‘be aware about various goods
and services available in the market’. He did not know that there were medically
recommended shoes in the market for his problem.
 The right which has been helped protected by the company selling the medically
recommended shoes is ‘Right to be Informed’. The company making the shoes was
holding workshops at different places in order to make the people suffering with his
problem aware of an available option.
Question :36
Manuj bought a packet of chips from a local shopkeeper and found that the ingredients
given on the label were not legible. He complained about it to the company. The company
sent a written apology stating that they will make sure that existing packets are withdrawn
from the market and new packets with legible labels are soon made available.
State the consumer right which Manuj exercised.
Answer:
 Right to seek redressal which states that a consumer has a right to get relief such as
replacement of product, removal of defeat in the product, compensation for any loss
or injury suffered by the consumer in case the producer or service falls short of his
expectations.
Question :37
Suman bought a box of cheese of a reputed brand from a local shopkeeper. On opening the
box she found a piece of stone in the cheese. She reported the matter to jpkeeper who
forwarded her complaint to the concerned company. Within a week the representative of
the company visited Soman’s residence with an apology and as a replacement offered her a
new cheese pack with four other varieties of cheese as compensation for the inconvenience
to her.
State the consumer right which Suman exercised.
Answer:
 Right to seek redressal which states that a consumer has the right to get relief such as
replacement of product, removal of defect in the product, compensation for any loss
324
or injury suffered by the consumer in case the product or service falls short of his
expectations.
Question :38
In a colony several people purchased mosquito killing rackets from a company. The majority
of rackets turned useless within a period of two months. Rishank who was one of the
residents of the colony decided to take the matter to the consumer court but the residents
were not united and he felt himself alone on the issue. The price of the racket was ?450.
Meanwhile one of the friends of Rishank who was a journalist reported about the incident
in a daily newspaper. When the company learnt about the situation it decided to take a
milestone step. The company decided to lake back or repair all the faulty rackets from the
residents of the society. The whole slory took an interesting twist when a technician from
the company told the management that in the instruction book provided with the racket it
was written to clean the racket with special care after every one month. When enquired it
was found that the residents with faulty rackets including Rishank didn’t clean their rackets
after one month.
Which important aspect from consumer point of view is highlighted in the above case?
At which level of consumer court could Rishank apply for the claim of his loss?
What was the important aspect from the point of view of business which compelled the
company to take such a milestone step?
Which consumer responsibility was not followed by the residents of Rishant’s colony?
Which consumer right was helped protected by the company?
Answer:
 The important aspect from consumer point of view highlighted in the above case is
‘Unorganised Consumers’. Rishank who is one of the residents of the colony decided
to take the matter to the consumer court but the residents were not united and he
felt himself alone on the issue.
 Since the compensation claimed by Rishank would have been less than 10 lakhs (as
the price of racket is Rs.450) he could have approached the District Forum.
 The important aspect from the point of view of business which compelled the
company to take such a milestone step was ‘Moral Justification’. The Company came
to know for the first time through newspaper news. Had they been earlier informed
and would not have taken any action the answer would be ‘Government
Intervention’.
 The consumer responsibility not followed by the residents of Rishank’s colony was
‘Following manufacturer’s instructions’. In the instruction book provided with the
racket, it was written to clean the racket with special care after every one month.
When enquired it was found that the residents with faulty rackets including Rishank
didn’t clean their rackets after one month.
325
 The consumer right which was helped protected by the company was ‘Right to be
Informed’. The Company from its side gave ‘directions for use’ which showed that
this right of consumer was protected.
Question :39
On the eve of Diwali Kalpana purchased two kilograms of sweets from VV Koyal Sweets. On
consumption of sweets her two children and husband fell sick and were to be hospitalized.
Kalpana wanted to file a case in the consumer forum but could not
do so because she did not have any proof of buying sweets from Koyal sweets. What proof
could Kalpana have obtained for filing the claim in the consumer court?
Answer:
 Kalpana could have obtained cash memo for filing the claim in consumer court.
Question :40
Nitish went to a shop to purchase a shirt. The shopkeeper offered him three colours of
shirts. Nitish asked him to show him the shirt which was on display. The shopkeeper told
him that he could not buy that shirt and would have to choose from the options provided
by him. Out of necessity and lack of time Nitish purchased a shirt out of the shirts shown by
the shopkeeper. He paid him cash and didn’t take the cash memo. Later, when he wore the
shirt at home and was about to leave, he found one button of the shirt missing. He went to
the shop the next day and asked for replacement. The shopkeeper bluntly denied that the
shirt was purchased from him.
Which consumer right of Nitish is violated here?
Which consumer responsibility was no! fulfilled by Nitish which led to this situation?
Can Nitish file complaint against the shopkeeper?
From the point of view of business which type of interest has been overlooked by the
shopkeeper? Why?
Answer:
 The consumer right of Nitish which is violated here is ‘Right to Choose’. The
shopkeeper told him that he could not buy that shirt and would have to choose from
the options provided by him.
 The consumer responsibility which was not fulfilled by Nitish was ‘Ask for a cash
memo after purchasing goods and services’. He paid him cash and didn’t take the
cash memo.
 No, Nitish can’t file the complaint against the shopkeeper as there is no proof of
purchase since he forgot to take the cash memo from him.
 From the point of view of business the interest which has been overlooked by the
shopkeeper is ‘Long-term interest of business’ because a good businessman knows
326
that the customer should be satisfied for repeat purchase and customer retention
which eventually helps in increasing the customer base.
327

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Business Studies Case Studies

Chapter 1 Nature & Significance of Management

 The concept ignored here is that of effectiveness as the quantity produced

 The concept of management highlighted above is that of Coordination. The top

 Coordination is the responsibility of all managers. Coordination is kept in mind

 Dheeraj belongs to lower level of management. Lower-level manager works at

 The concepts of management which have been violated are:

 The type of objectives discussed are Organizational Objectives since

 Sanjeev works at the top level to management of the company as he is

 The concept of management which is followed is Cooperation. Since the workers

 The functions of management highlighted above are

 Management as Science—Systematised body of knowledge. We can see students of

 Rishitosh Mukerjee is working at the Middle Level management. Nature &

 The characteristics of coordination involved above are:

 The objectives of management discussed above are:

 Henceforth, Arundhati will be working at middle level of management.

 In the above case, management is being considered as an art.

 Rajat, all of them are working at the middle level of management.

 Yes, the production manager of Vaibhav Garments Ltd. is effective as he could

 (A) Management is a Art.

 The two techniques of scientific management used by Sandhya to solve the

 The relevant principle of management given by Fayol is:

 The principle of management described in the above paragraph is ‘Harmony,

 The principle of management described in the above paragraph is

 The multinational company didn’t follow the Principle of Equity. It emphasizes

 The various principles of management that Mehul is advising Neeraj to follow

Outline the concept of principles of management.

 Stability of Personnel: Stability of personnel is principle of management which

 The two features of principles of management mentioned in the above

 Standardisation and Simplification of Work is the technique of scientific

 The technique of management which is followed here is Standardisation (Each

 The concept of management discussed here is Mental Revolution. The owner of

 The principle of Fayol which is violated ‘Discipline’.

 The principle of Fayol which is violated here is ‘Unity of command’.

 The technique of Scientific Management which is used here is Functional

Work is Worship’ is a leading construction company. The organisation has grown

 The various types of techniques used are:

 Sandhya has used the following two techniques of scientific management:

 The type of scientific technique discussed here is Motion Study.

 The principle of management which is followed here is ‘Science not Rule of

 The nature of principle of management which is highlighted here is ‘Principles of

 The points of importance of principles of management which are highlighted in

 The natures of principles of management highlighted above are:

 Technological Environment is the component of business environment

 The various dimensions of business environment being referred to in the above

 The various dimensions of business environment being referred to the in the

The Government of India is seriously thinking of allowing the oil-marketing public

 Political environment has led to the rise in the Sensex.

 The various dimensions of business environment which relate to the above-

 The various dimensions of business environment being referred to in the above

 Relativity is the relevant feature of business environment which is being

 The various dimensions of business environment being referred to in the above

 Economic environment is the dimension of business environment of India

 The various dimensions of business environment being referred to the in the

 Disinvestment: Disinvestment refers to transfer in the public sector enterprises

 The feature of management which is being highlighted is Dynamic.

Gallant’ is a well-known FMCG (Fast Moving Consumer Goods) company in India.

 The importance of business environment which is highlighted above is — Helps

 The dimension of Business Environment which is affecting the indigenous

 The dimension of business environment which is covered here is

 The feature of business environment which is discussed above is “Relativity” as

 Globalisation. With the passage of time within 20 years the economies of

 Need for developing human resource.

 The various importance of business environment highlighted above: